Important Points To Know When Applying For Employment Insurance (EI)
April 14, 2021 | Written by: Sohail Afzal
You can apply for the ‘Employment Insurance’ when you are laid-off provided you are eligible for it. You can claim EI benefits from 14 to 50 weeks. EI payments are taxable income, meaning federal and provincial or territorial taxes, where applicable, are deducted when you receive them. The amount of EI benefits and the withholding tax rate primarily depends on the following factors:
- Unemployment Rate in the region
- Insurable hours accumulated in the last 52 weeks
- What reason is mentioned in ROE
- And depends if EI deductions have been regularly submitted to the CRA
You cannot know exactly how much EI benefits you will receive until Service Canada processes your request. Remember, you can be asked to repay EI benefits if your annual income in 2021 exceeds $70,375.
You May Be Entitled To EI Regular Benefits If You:
- were employed in insurable employment
- lost your job through no fault of your own
- have been without work and pay for at least seven consecutive days in the last 52 weeks
- have worked for the required number of insurable employment hours in the last 52 weeks
- are ready, willing, and capable of working each day
- are actively looking for work (you must keep a written record of employers you contact, including when you contacted them)
Let’s discuss what is the maximum amount you can expect to receive as EI benefits if you are laid-off. Suppose you worked 40 insurable hours a week during the last 52 weeks at an hourly rate of $25 and now you receive an ROE on March 31, 2021. By looking at the table below, you can figure out what is the maximum per week EI benefits you can expect to receive from Service Canada.
|Insurable hours per week||40|
|Insurable Earnings per week||$1000|
|Maximum EI benefits per week up to 55%||$550|
If unfortunately, you do not get a job due to COVID or for any other reason for long enough, the maximum EI earnings you can get based on your accumulated hours up to the date on which you receive an ROE from your employer, would be as follows:
|Total Insurable hours in last 52 weeks||2,080|
|Total Insurable earnings in last 52 weeks||$52,000|
|Maximum EI benefits up to 55%||$28,600|
Most of the time, when you receive EI payments, the EI Service Canada deducts income tax and you receive the net amount of EI benefits. Many people think that this amount will be enough to “cover” their taxable income and that they will owe nothing more to the CRA. However, the amount that is normally deducted is a much lower percentage than what you will have to pay on your taxable income for the year. You will realize at the time of filing your return that adding your EI income to your other income for the year will be taxed at a higher percentage than what has been withheld at the time of EI payments. At the very least, understand that collecting EI may lead you to owe money on your tax return.
What You Need Before You Start?
To complete the online EI application for EI regular benefits, you will need the following personal information:
- Social Insurance Number (SIN)
- Last Name
- Mailing and Residential Addresses, including the postal codes
- Complete banking information to sign up for the direct deposit, including:
- Financial Institution Name
- Bank Branch Number
- Account Number
- Names, Addresses, Dates of Employment, and reason for separation for all your employers over the last 52 weeks
This information will be used, along with your record(s) of employment, to calculate your benefit rate. When you apply for EI benefits, be sure to sign up for a direct deposit to get your payments as quickly as possible. When you use direct deposit, your EI payments are deposited automatically into your bank account 2 business days after we process your EI report. For more details, you can visit GTA Accounting and consult the experts for queries.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.