Changes to the CPP Contribution rules in 2012

What are the changes to the CPP contribution rules?

Current rules

Under the current rules (before January 1, 2012), as an employer you have to stop deducting CPP contributions from an employee’s pensionable earnings when the employee:

  • is 60 to 70 years of age; and
  • gives you proof that he or she is receiving a CPP or Quebec Pension Plan (QPP) retirement pension (for example, an award letter issued by Human Resources and Skills Development Canada).

For more information, go to Employees who are 60 to 70 years of age.

New rules

Starting January 1, 2012, you may have to deduct CPP contributions from the pensionable earnings you pay an employee who is 60 to 70 years of age, even if the employee is receiving a CPP or QPP retirement pension.

Under the new rules, an employee who works and receives a CPP or QPP retirement pension will now have to contribute to the CPP if he or she is:

  • 60 to 65 years of age;
  • 65 to 70 years of age, unless the employee has filed an election with you or another employer to stop paying CPP contributions (the election will take effect on the first day of the month following the month the employee provides you with a completed and signed election form);
  • 65 to 70 years of age, if the employee revoked his or her election to stop paying CPP contributions in 2013 or later.

Notes
These legislative amendments do not affect the salary or wages of an employee who is considered to be disabled under the CPP or QPP, nor do they affect the salary and wages of a person who has reached 70 years of age. Do not deduct CPP contributions from the salary and wages that you pay these employees.

Employees working in Quebec and other workers not subject to the CPP will not be affected by these changes.

You will have to deduct CPP contributions from an employee who is employed in pensionable employment and is receiving pensionable earnings, and meets one of these conditions:

  • who is currently receiving a CPP or QPP retirement pension and is 60 to 65 years of age, even if it means deducting from someone who was not contributing in a previous year because he or she was receiving a CPP/QPP retirement pension;
    OR
  • who is currently receiving a CPP or QPP retirement pension and is 65 to 70 years of age, and who has not given you a copy of a signed and completed Form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election.

Note
The CRA can assess you for failing to deduct CPP contributions or for failing to remit the CPP contributions to the CRA as required. The assessment may also include penalty and interest charges. For more information, go to Penalties, interest, and other consequences.

Starting dates for implementing Form CPT30

If, in December 2011, an employee is at least 65 years of age and is receiving a CPP or QPP retirement pension and does not want to start contributing to the CPP in January 2012, then that employee should make his or her election to stop contributing to the CPP by providing a copy of a signed and completed Form CPT30 to you and any other employer he or she has as early as possible in December and sending the original form to the CRA.

Source: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/cpp-rpc/cppchng-wh-eng.html

 

Canada Pension Plan 2012

Canada Revenue Agency announces maximum pensionable earnings for 2012

The Canada Revenue Agency (CRA) recently announced that the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2012 will be $50,100 — up from $48,300 in 2011.

Contributors who earn more than $50,100 in 2011 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2012 remains $3,500. Individuals who earn less than that amount do not have to contribute to the CPP.

The employee and employer contribution rates for 2012 will be unchanged at 4.95%, and the self-employed contribution rate will remain at 9.9%.

The maximum employer and employee contribution to the plan for 2012 will be $2,306.70, and the maximum self-employed contribution will be $4,613.40. The maximums in 2011 were $2,217.60 and $4,435.20, respectively.

 

CPP contribution rates, maximums and exemptions

Year Max. Annual Pensionable Earnings Basic Exemption Maximum Contributory Earnings Employee Contribution Rate (%) Max. Annual Employee Contribution Max. Annual Self – Employed Contribution
2012    $50,100 $3,500 $46,600 4.95 $2,306.70 $4,613.40
2011    $48,300 $3,500 $44,800 4.95 $2,217.60 $4,435.20
2010    $47,200 $3,500 $43,700 4.95 $2,163.15 $4,326.30
2009    $46,300 $3,500 $42,800 4.95 $2,118.60 $4,237.20
2008    $44,900 $3,500 $41,400 4.95 $2,049.30 $4,098.60
2007    $43,700 $3,500 $40,200 4.95 $1,989.90 $3,979.80
2006    $42,100 $3,500 $38,600 4.95 $1,910.70 $3,821.40

Employee or independent contractor?

 Prue v. M.N.R., 2011 TCC 9, (January 10, 2011), http://decision.tcc-cci.gc.ca/en/2011/2011tcc9/2011tcc9.html

This appeal brought before the Tax Court of Canada focussed on whether an individual was an employee or an independent contractor.  I haven’t read it line by line to come up with a detailed analysis but here is what I gleaned from the document.

1.  Document the  nature of the relationship – put it in writing, sign it.  Do the parties involved  want this to be an employee/employer relationship or that of an independent contractor.

2.  Individuals may find the idea of being an independent contractor appealing in that as a business venture they can claim expenses otherwise denied to employees.  However,  if, at some point in the future, the services of the contractor are no longer needed they might suddenly have a chance of heart.  Now they want to be an employee so they can claim Employment Insurance benefits.  To that end they can apply to the Rulings Officer at a Tax Services Office operated by Canada Revenue Agency (“CRA”) on the insurability of their employment.    This opens a whole can of worms for the employer with CRA - out of which very little of any good can result!

Canada Pension Plan 2011

Canada Revenue Agency announces maximum pensionable earnings for 2011

The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2011 will be $48,300—up from $47,200 in 2010. 

Contributors who earn more than $48,300 in 2011 are not required or permitted to make additional contributions to the CPP.

The basic exemption amount for 2011 remains $3,500. Individuals who earn less than that amount do not have to contribute to the CPP.

The employee and employer contribution rates for 2011 will remain unchanged at 4.95%, and the self-employed contribution rate will remain unchanged at 9.9%.

The maximum employer and employee contribution to the plan for 2011 will be $2,217.60, and the maximum self‑employed contribution will be $4,435.20. The maximums in 2010 were $2,163.15 and $4,326.30.


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