EI and taxes: What Albertans need to know
Employment Insurance is a taxable income
Papercuts and mind-numbing math — ahhhh, the joy of tax time.
But before you file, there are some things to watch out for.
Especially if you're one of the many Albertans collecting Employment Insurance.
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EI is taxable income
If it wasn't bad enough that you lost your job in 2015 — you may also owe some cheddar to Canada Revenue Agency.
That's because the government only claws back 10 per cent tax on your EI cheques.
"If the minimal federal tax rate is 15 per cent and then you add the minimum Alberta tax rate of 10 per cent to that — we're talking about a minimum 25 per cent tax withholding that you have to pay," said Calgary tax specialist Cleo Hamel.
"But you're only getting 10 per cent taken off your EI cheque."
Hamel says that means most people are going to have to pay something.
What the what?
For those who've paid into Employment Insurance for the majority of their professional career, it may seem backwards to have to pay tax on EI income
"The fact is, it is a taxable income," said Hamel.
"It's an insurance policy right? You're paying into your insurance policy for employment and then you hit on a bad time like we've had."
And Albertans who were only unemployed for part of 2015 may have to pay back some or all of their EI benefits.
"They might find they've exceeded the $62,000 maximum that you can collect before you have to pay back your EI benefit," she said.
Plan for it
Hamel says if you did get a severance package, you can lower your net income by putting part of it into your RRSP. The 2015 deadline for contributions is Feb. 29.
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Keep your receipts for medical expense (you can even claim batteries for hearing aids) and activities for your kids.
She also says you should adjust your TFSA savings.
"The contribution limit dropped to $5,500 in 2016, down from $10,000 in 2015. Make sure you do not over-contribute or you will be penalized."
And that penalty is one per cent for every dollar you overpaid. She says the government tracks how much you contribute, not how much you withdraw and then put back in.
If you don't know how much you've contributed, you can contact CRA directly at 1-800-959-8281.