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Tax Facts

Employment Insurance for Self-Employed Persons

The Federal Government, as part of Canada's Economic Action Plan, has introduced Bill C-56, Fairness for the Self-Employed Act, which will allow self-employed person to "opt-in” to restricted Employment Benefits currently only available to employees.  The legislation has now been passed therefore, effective January 1, 2010, those taxpayers running proprietorships can now access some of the same EI benefits that employees have.

The Benefits

The Fairness for the Self-Employed Act will allow self-employed persons to receive EI benefits for life-transition events as follows:

  • Maternity benefits (15 weeks maximum) are available to birth mothers and cover the period surrounding birth
  • Parental/adoptive benefits (35 week maximum) are available to adoptive or biological parents while they are caring for a newborn or newly adopted child, and may be taken by either parent or shared between them
  • Sickness benefits (15 weeks maximum) which may be paid to a person who is unable to work because of sickness, injury or quarantine; and
  • Compassionate care benefits (6weeks maximum) which may be paid to persons who have to be away from work temporarily to provide care or support to a family member who is gravely ill with significant risk of death

It is important to note that self-employed persons will remain ineligible for regular EI benefits due to lay-offs or business slow-downs.

Opt-in

Beginning January 1, 2010, self-employed persons have the option of participating in the program. In order to be eligible for benefits, the individual must register with the Canada Employment Insurance Commission on-line through Service Canada. For the purposes of this EI program, you are considered self-employed if you operate your own business or are employed by a corporation and control more than 40% of the voting shares.

Opt-out

Once registered, you will have 60 days to change your mind. After the 60 days, you are in the program for the calendar year whether you want to or not. Assuming that you do not collect any EI benefits, you may choose to opt-out at the beginning of any calendar year.

If you do receive EI benefits, you are no longer eligible to opt-out of the EI program on self-employed earnings, ever. This stipulation remains in effect regardless of your self-employed status or change in self-employment. Once you receive a benefit, you will continue to remain in the program and pay annual premiums.

Costs

Self-employed persons deciding to "opt-in” to the EI program will be subjected to the EI premium same as an employee. The business however, will not be required to pay the employer's portion of the EI premium. Premiums will be paid on the individual's personal tax return annually and a minimum self-employed income of $6,000 is required.

In order to qualify for EI benefits the self-employed person must be registered and pay EI premiums for one year prior to filing a claim. This means that if you register in January 2010, you will become eligible to receive EI benefits in January 2011.

Additionally, any income earned from employment or self-employment while in receipt of EI benefits may reduce the amount of the benefit.

The legislation for this Act was passed on December 15, 2009 so self-employed individuals can opt into the EI sytem and be eligible for special EI benefits. Self-employed persons should check with their individual financial advisors before entering into an EI agreement to ensure that it is right for you.

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