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openaccountants/skills/ca-fed-cpp-ei.md
ca-fed-cpp-ei.md372 lines18.1 KB
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1---
2name: ca-fed-cpp-ei
3description: >
4 Use this skill whenever asked about Canada Pension Plan (CPP) or Employment Insurance (EI) contributions for self-employed individuals. Trigger on phrases like "CPP self-employed", "Schedule 8", "CPP2", "YAMPE", "EI opt-in self-employed", "how much CPP do I pay", "self-employed EI benefits", "CPP contribution calculation", or any question about CPP/EI obligations for a self-employed sole proprietor or single-member entity in Canada. This skill covers CPP1 rates, CPP2 second ceiling, Schedule 8 computation, EI voluntary opt-in, tax treatment (line 22200 deduction and non-refundable credit), age exemptions, overpayment recovery, and edge cases. ALWAYS read this skill before touching any CPP/EI-related work.
5version: 2.0
6jurisdiction: CA-FED
7tax_year: 2025
8category: international
9depends_on:
10 - social-contributions-workflow-base
11---
12 
13# Canada CPP/EI Self-Employed Skill v2.0
14 
15## Section 1 -- Quick reference
16 
17Read this whole section before computing anything.
18 
19| Field | Value |
20|---|---|
21| Country | Canada (Federal) |
22| Jurisdiction Code | CA-FED |
23| Primary Legislation | Canada Pension Plan Act (R.S.C., 1985, c. C-8); Employment Insurance Act (S.C. 1996, c. 23) |
24| Supporting Legislation | Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)) -- line 22200 deduction, Schedule 8, non-refundable credits |
25| Tax Authority | Canada Revenue Agency (CRA) |
26| Tax Year | 2025 |
27| Currency | CAD only |
28| Filing Deadline | June 15 (self-employed), but PAYMENT due April 30 |
29| Contributor | Open Accountants community |
30| Validated By | Pending -- requires sign-off by Canadian CPA |
31| Validation Date | Pending |
32| Skill Version | 2.0 |
33| Confidence Coverage | Tier 1: CPP/CPP2 rate calculation, Schedule 8 mechanics, EI opt-in rules, tax treatment. Tier 2: mid-year status changes, partial-year contributions, Quebec QPP interactions. Tier 3: disability pension interactions, international social security agreements. |
34 
35**CPP1 thresholds (2025):**
36 
37| Item | Amount |
38|---|---|
39| Year's Maximum Pensionable Earnings (YMPE) | $71,300.00 |
40| Year's Basic Exemption | $3,500.00 |
41| Maximum contributory earnings (YMPE - exemption) | $67,800.00 |
42| Employee rate | 5.95% |
43| Self-employed rate (2x employee) | 11.90% |
44| Maximum self-employed CPP1 contribution | $8,068.20 |
45 
46**CPP2 thresholds (2025):**
47 
48| Item | Amount |
49|---|---|
50| Year's Additional Maximum Pensionable Earnings (YAMPE) | $81,200.00 |
51| Maximum additional contributory earnings (YAMPE - YMPE) | $9,900.00 |
52| Employee CPP2 rate | 4.00% |
53| Self-employed CPP2 rate (2x employee) | 8.00% |
54| Maximum self-employed CPP2 contribution | $792.00 |
55 
56**EI thresholds (2025, outside Quebec):**
57 
58| Item | Amount |
59|---|---|
60| Maximum insurable earnings (MIE) | $65,700.00 |
61| Self-employed premium rate | $1.64 per $100 (employee rate only, no employer portion) |
62| Maximum annual premium (self-employed) | $1,077.48 |
63 
64**Conservative defaults:**
65 
66| Ambiguity | Default |
67|---|---|
68| Unknown province | Ontario (non-Quebec, CPP applies) |
69| Unknown CPP pension status | Not receiving pension (contributions required) |
70| Unknown EI opt-in status | Not opted in (no EI premiums) |
71| Unknown T4 CPP already paid | $0 (full self-employed contribution required) |
72 
73---
74 
75## Section 2 -- Required inputs and refusal catalogue
76 
77### Required inputs
78 
79Before computing any CPP or EI figure, you MUST know:
80 
811. Date of birth -- determines whether CPP contributions are required (age 18-70 range)
822. Province of residence -- Quebec residents use QPP, not CPP (this skill does NOT cover QPP)
833. Net self-employment income for the tax year -- CPP is based on current year, not prior year
844. Is the client also employed (T4 income)? -- employee CPP already paid reduces self-employed obligation
855. Has the client opted in to EI? -- EI is voluntary for self-employed
866. Is the client receiving a CPP disability or retirement pension? -- may affect contribution obligations
877. Did the client turn 18 or 70 during the tax year? -- pro-rata calculation required
88 
89If province is Quebec, STOP. This skill covers CPP only. QPP has different rates and thresholds.
90 
91### Refusal catalogue
92 
93**R-CA-CPP-1 -- Quebec resident.** Trigger: client resides in Quebec. Message: "Quebec Pension Plan (QPP) applies instead of CPP. QPP has different rates (6.40% employee / 12.80% self-employed for 2025). This skill does NOT cover QPP. Please escalate to a practitioner with QPP expertise."
94 
95**R-CA-CPP-2 -- Disability pension interaction.** Trigger: client receives a CPP disability pension and asks about contribution obligations or benefit impacts. Message: "CPP disability pension interactions with self-employment contributions are complex and outside this skill's scope. Please escalate to a licensed Canadian CPA."
96 
97**R-CA-CPP-3 -- International social security agreement.** Trigger: client asks about CPP credits under a bilateral social security agreement. Message: "International social security agreements require case-specific analysis. Please escalate to a licensed Canadian CPA familiar with treaty provisions."
98 
99---
100 
101## Section 3 -- Payment pattern library
102 
103This is the deterministic pre-classifier for bank statement entries related to CPP and EI. Match by case-insensitive substring on the counterparty name or transaction description.
104 
105### 3.1 CRA payments (CPP/EI embedded in T1 balance owing)
106 
107| Pattern | Treatment | Notes |
108|---|---|---|
109| CRA, CANADA REVENUE AGENCY | T1 PAYMENT COMPONENT | Self-employed CPP/EI are not paid separately; rolled into T1 balance owing (line 42100) |
110| RECEIVER GENERAL, REC GEN CANADA | T1 PAYMENT COMPONENT | Same as CRA -- instalment or balance owing payment |
111| CRA INSTALMENT, QUARTERLY INSTALMENT | INSTALMENT PAYMENT | If net tax owing exceeds $3,000 in current AND prior years, quarterly instalments required (March 15, June 15, September 15, December 15) |
112| CRA REFUND, TAX REFUND CRA | T1 REFUND | May include CPP overpayment refund (line 44800) |
113 
114### 3.2 EI-related payments (if opted in)
115 
116| Pattern | Treatment | Notes |
117|---|---|---|
118| SERVICE CANADA, ESDC | EI BENEFIT or REGISTRATION | Employment Insurance benefit payment or opt-in registration |
119| EI MATERNITY, EI PARENTAL, EI SICKNESS | EI BENEFIT RECEIPT | Special benefits available to opted-in self-employed |
120 
121### 3.3 Provincial pension (Quebec -- refusal trigger)
122 
123| Pattern | Treatment | Notes |
124|---|---|---|
125| RRQ, RETRAITE QUEBEC, QPP | REFUSAL TRIGGER | Quebec Pension Plan -- fire R-CA-CPP-1 |
126 
127---
128 
129## Section 4 -- CPP eligibility and computation rules
130 
131### 4.1 CPP eligibility (Tier 1)
132 
133Legislation: Canada Pension Plan Act, s. 10
134 
135| Condition | CPP Obligation |
136|---|---|
137| Age 18 to 69 (inclusive) with net self-employment earnings > $3,500 | MUST contribute |
138| Age 70 or older | EXEMPT -- no CPP contributions required |
139| Under age 18 | EXEMPT -- no CPP contributions required |
140| Receiving CPP retirement pension and age 60-64 | MUST contribute (mandatory since 2012) |
141| Receiving CPP retirement pension and age 65-69 | MAY elect to stop contributing (file Form CPT30) |
142| Receiving CPP disability pension | EXEMPT -- do not contribute |
143| Net self-employment earnings <= $3,500 (basic exemption) | No CPP payable (earnings below floor) |
144 
145### 4.2 CPP1 computation (Tier 1)
146 
147```
148pensionable_earnings = min(net_self_employment_income, $71,300) - $3,500
149pensionable_earnings = max(pensionable_earnings, 0)
150cpp1 = pensionable_earnings x 11.90%
151cpp1 = min(cpp1, $8,068.20)
152```
153 
154### 4.3 CPP2 computation (Tier 1)
155 
156Legislation: Canada Pension Plan Act (as amended by Bill C-97, 2024)
157 
158```
159cpp2_earnings = min(net_self_employment_income, $81,200) - $71,300
160cpp2_earnings = max(cpp2_earnings, 0)
161cpp2 = cpp2_earnings x 8.00%
162cpp2 = min(cpp2, $792.00)
163```
164 
165### 4.4 Schedule 8 computation (Tier 1)
166 
167| Line | Description | Computation |
168|---|---|---|
169| Line 1 | Total CPP pensionable employment income (from T4 slips) | Sum of Box 26 from all T4s |
170| Line 2 | CPP contributions deducted (from T4 slips) | Sum of Box 16 from all T4s |
171| Line 3 | Net self-employment earnings | From line 12200 of T1 |
172| Line 4 | Total pensionable earnings | Line 1 + Line 3 |
173| Line 5 | Basic exemption | $3,500 (or pro-rated if partial year) |
174| Line 6 | Maximum contributory earnings | min(Line 4, YMPE) - Line 5 |
175| Line 7 | CPP contributions on self-employment | (Line 6 x 11.90%) - Line 2 |
176| Line 8 | CPP2 additional contributions | Per Step 4.3 above |
177| Line 9 | Total contributions payable | Line 7 + Line 8 |
178 
179Key rule: If the client also has T4 employment income with CPP already deducted, the employee CPP contributions (Line 2) are subtracted from the total obligation. If T4 CPP contributions already cover the maximum, self-employed CPP = $0.
180 
181### 4.5 Tax treatment of self-employed CPP (Tier 1)
182 
183Legislation: Income Tax Act, s. 60(e), s. 118.7
184 
185CPP1 split: Employer-equivalent half (50%) is a deduction from net income (line 22200). Employee-equivalent half (50%) is a non-refundable tax credit (line 30800, 15% federal credit).
186 
187CPP2 split: Employer-equivalent half (50%) is a deduction from net income (line 22215). Employee-equivalent half (50%) is a non-refundable tax credit (line 30800, 15% federal credit).
188 
189The deduction is more valuable at higher marginal rates. The credit is worth a flat 15% regardless of income.
190 
191### 4.6 EI for self-employed (Tier 1)
192 
193Legislation: Employment Insurance Act, Part VII.1, s. 152.07-152.21
194 
195EI is voluntary for self-employed. To opt in, register with Service Canada. 12-month waiting period before claiming benefits. Once benefits are claimed, cannot opt out. Self-employed EI covers SPECIAL BENEFITS ONLY (maternity, parental, sickness, compassionate care, family caregiver). It does NOT cover regular unemployment benefits.
196 
197```
198ei_premium = min(net_self_employment_income, $65,700) x 1.64%
199ei_premium = min(ei_premium, $1,077.48)
200```
201 
202EI premiums are claimed as a non-refundable tax credit on line 31200 (15% federal credit).
203 
204---
205 
206## Section 5 -- Age exemptions and pro-rata rules
207 
208Legislation: Canada Pension Plan Act, s. 12, s. 13
209 
210| Age Event | CPP Treatment | EI Treatment |
211|---|---|---|
212| Turn 18 during the year | Contribute from month after 18th birthday | No age restriction |
213| Age 18-69 all year | Full year contributions | Full year EI (if opted in) |
214| Turn 70 during the year | Contribute up to and including month of 70th birthday | No age restriction |
215| Age 70+ at start of year | NO CPP contributions | EI still available (if opted in) |
216| Under 18 all year | NO CPP contributions | No age restriction |
217 
218Pro-rata basic exemption when turning 18 or 70 during the year:
219 
220```
221pro_rata_exemption = ($3,500 / 12) x number_of_contributory_months
222```
223 
224---
225 
226## Section 6 -- Overpayment recovery and filing
227 
228### 6.1 Overpayment recovery (Tier 1)
229 
230Legislation: Income Tax Act, s. 118.7
231 
232| Overpayment Type | How Recovered |
233|---|---|
234| CPP overpayment (employee contributions from T4s exceed maximum) | Claimed on line 44800 of T1 as refundable credit |
235| CPP2 overpayment | Claimed on line 44801 of T1 as refundable credit |
236| EI overpayment (multiple T4s) | Claimed on line 45000 of T1 as refundable credit |
237 
238### 6.2 Payment and filing (Tier 1)
239 
240| Requirement | Detail |
241|---|---|
242| How CPP is paid | Added to balance owing on T1 return (line 42100) |
243| Filing deadline | June 15 (self-employed), but PAYMENT due April 30 |
244| Instalment requirements | If net tax owing exceeds $3,000 ($1,800 in Quebec) in current year AND either of the two prior years |
245| Instalment dates | March 15, June 15, September 15, December 15 |
246| Interest on late payment | Prescribed rate set quarterly by CRA, compounded daily |
247 
248CPP and EI are NOT paid separately by self-employed individuals. They are calculated on Schedule 8 and rolled into the T1 balance owing.
249 
250---
251 
252## Section 7 -- Edge case registry
253 
254### EC1 -- Client turns 70 mid-year (Tier 1)
255Situation: Client's 70th birthday is in July 2025.
256Resolution: CPP contributions required January through July (7 months). Pro-rate the basic exemption: ($3,500 / 12) x 7 = $2,041.67. Schedule 8 handles the pro-rata calculation.
257 
258### EC2 -- Client receiving CPP retirement pension, age 65-69 (Tier 2)
259Situation: Client started CPP retirement pension at 65 and continues to be self-employed.
260Resolution: Contributions are optional for ages 65-69 if receiving CPP retirement. Client must file Form CPT30 to elect to stop contributing. If no CPT30 filed, contributions are required. Flag for reviewer -- confirm pension status and whether CPT30 has been filed.
261 
262### EC3 -- Quebec resident (Tier 3)
263Situation: Client resides in Quebec.
264Resolution: QPP applies instead of CPP. QPP has different rates (6.40% employee / 12.80% self-employed for 2025). This skill does NOT cover QPP. Escalate to practitioner with QPP expertise.
265 
266### EC4 -- Self-employed EI opt-in within first 12 months (Tier 1)
267Situation: Client opted in to EI in August 2025, wants to claim maternity benefits in January 2026.
268Resolution: 12-month waiting period applies. Client cannot claim benefits until August 2026. Premiums are still due for August-December 2025.
269 
270### EC5 -- Net self-employment loss (Tier 1)
271Situation: Client has a net self-employment loss (negative income).
272Resolution: No CPP contributions are payable on a loss. Pensionable earnings = $0. Unlike Malta SSC, there is NO minimum CPP contribution.
273 
274### EC6 -- Religious exemption (Tier 2)
275Situation: Client is a member of a religious group that has an approved exemption from CPP.
276Resolution: Form CPT17 must have been filed and approved. Flag for reviewer -- confirm exemption status with CRA before excluding CPP.
277 
278### EC7 -- Non-resident self-employed in Canada (Tier 2)
279Situation: Client is a non-resident of Canada earning self-employment income from Canadian sources.
280Resolution: CPP may still apply if the work is performed in Canada, regardless of residence. Flag for reviewer -- confirm whether the Canada-source self-employment triggers CPP obligations.
281 
282### EC8 -- EI opt-out after opting in but before claiming (Tier 1)
283Situation: Client opted in to EI for self-employed in 2024, has not claimed benefits, wants to opt out.
284Resolution: Client may opt out by December 31 of the current year if NO benefits have been claimed. Premiums paid for the opt-in year are refundable. Once any benefit has been claimed, the client cannot opt out.
285 
286---
287 
288## Section 8 -- Reviewer escalation protocol
289 
290When a Tier 2 situation is identified:
291 
292```
293REVIEWER FLAG
294Tier: T2
295Client: [name]
296Situation: [description]
297Issue: [what is ambiguous]
298Options: [possible treatments]
299Recommended: [most likely correct treatment and why]
300Action Required: Licensed Canadian CPA must confirm before advising client.
301```
302 
303When a Tier 3 situation is identified:
304 
305```
306ESCALATION REQUIRED
307Tier: T3
308Client: [name]
309Situation: [description]
310Issue: [outside skill scope]
311Action Required: Do not advise. Refer to licensed Canadian CPA. Document gap.
312```
313 
314---
315 
316## Section 9 -- Test suite
317 
318### Test 1 -- Standard self-employed, mid-range income
319Input: Born 1985, Ontario resident, net self-employment income $50,000, no T4 income, no EI opt-in.
320Expected output: CPP1 = ($50,000 - $3,500) x 11.90% = $5,533.50. CPP2 = $0 (below YMPE). EI = $0 (not opted in). Line 22200 deduction = $2,766.75. Line 30800 credit base = $2,766.75.
321 
322### Test 2 -- High-income, both ceilings hit
323Input: Born 1978, Alberta resident, net self-employment income $120,000, no T4 income.
324Expected output: CPP1 = $8,068.20 (capped). CPP2 = $792.00 (capped). Total CPP = $8,860.20. Line 22200 deduction = $4,430.10. Line 30800 credit base = $4,430.10.
325 
326### Test 3 -- Income between YMPE and YAMPE
327Input: Born 1990, BC resident, net self-employment income $75,000, no T4 income.
328Expected output: CPP1 = $8,068.20 (capped at YMPE). CPP2 = ($75,000 - $71,300) x 8.00% = $296.00. Total CPP = $8,364.20.
329 
330### Test 4 -- Below basic exemption
331Input: Born 1992, Ontario resident, net self-employment income $2,500.
332Expected output: CPP = $0.00 (below $3,500 basic exemption). No Schedule 8 contribution.
333 
334### Test 5 -- Self-employed with T4 employment income
335Input: Born 1988, Ontario, T4 pensionable earnings $45,000, T4 CPP deducted $2,468.25, net self-employment income $40,000.
336Expected output: Combined pensionable earnings exceed YMPE. Self-employed CPP on Schedule 8 = $8,068.20 - $2,468.25 (employee) - $2,468.25 (deemed employer) = $3,131.70.
337 
338### Test 6 -- EI opt-in calculation
339Input: Opted-in self-employed, Ontario, net self-employment income $50,000.
340Expected output: EI premium = $50,000 x 1.64% = $820.00. Below maximum of $1,077.48.
341 
342### Test 7 -- Age 72, self-employed
343Input: Born 1953, net self-employment income $80,000.
344Expected output: CPP = $0.00 (age 70+ exemption). No Schedule 8 required for CPP.
345 
346### Test 8 -- Net loss
347Input: Born 1985, net self-employment loss of ($5,000).
348Expected output: CPP = $0.00. No minimum contribution. No Schedule 8 obligation.
349 
350---
351 
352## Section 10 -- Prohibitions and disclaimer
353 
354### Prohibitions
355 
356- NEVER compute CPP for Quebec residents -- QPP applies, not CPP
357- NEVER tell a self-employed client they must pay EI -- it is voluntary
358- NEVER forget to split CPP into deduction (line 22200) and credit (line 30800) -- both halves must be claimed
359- NEVER apply CPP to a client aged 70 or over at the start of the year
360- NEVER ignore T4 CPP already deducted when computing self-employed CPP on Schedule 8
361- NEVER present CPP2 as optional -- it is mandatory for earnings above YMPE
362- NEVER combine CPP and EI into a single figure without showing the breakdown
363- NEVER advise on QPP rates using CPP figures -- they are different
364- NEVER state that self-employed EI covers regular (unemployment) benefits -- it covers special benefits only
365- NEVER compute figures without confirming the tax year -- rates change annually
366 
367### Disclaimer
368 
369This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a CPA, EA, tax attorney, or equivalent licensed practitioner in your jurisdiction) before filing or acting upon.
370 
371The most up-to-date, verified version of this skill is maintained at [openaccountants.com](https://openaccountants.com). Log in to access the latest version, request a professional review from a licensed accountant, and track updates as tax law changes.
372 

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About

Use this skill whenever asked about Canada Pension Plan (CPP) or Employment Insurance (EI) contributions for self-employed individuals. Trigger on phrases like "CPP self-employed", "Schedule 8", "CPP2", "YAMPE", "EI opt-in self-employed", "how much CPP do I pay", "self-employed EI benefits", "CPP contribution calculation", or any question about CPP/EI obligations for a self-employed sole proprietor or single-member entity in Canada. This skill covers CPP1 rates, CPP2 second ceiling, Schedule 8 computation, EI voluntary opt-in, tax treatment (line 22200 deduction and non-refundable credit), age exemptions, overpayment recovery, and edge cases. ALWAYS read this skill before touching any CPP/EI-related work.

CA-FEDty-2025

1 of 3 in the CA-FED workflow: