The election remains valid until the employee turns age 70 or revokes it
Question: I know that employees aged 65 to under 70 years can opt not to contribute to the Canada Pension Plan (CPP) by completing and filing a CPT30 form, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election. Do they have to make this election every year to continue to opt out or does the election apply for future years?
Answer: Employees aged 65 to under 70 years can choose whether or not they wish to contribute to the CPP. If they choose to continue contributing, they do not have to do anything. Beginning January 1, 2012, the employer will automatically make the deductions.
Employees who opt not to contribute must first complete a CPT30 form and send it to the Canada Revenue Agency.They must also give a copy to their employer (current and future employers) and keep a copy for themselves.
The election to stop contributions takes effect on the first day of the month after the date the employee gives a copy of the form to the employer.
The election remains valid until the employee turns age 70 or revokes it by completing the applicable sections on a CPT30 form.
Once an employee makes an election or revokes an election, he or she cannot change it until the next calendar year.
Completing T4 box (24)
Question: We have an employee who worked in both Alberta and Ontario last year. I know that I have to prepare a T4 slip for the employment period in each province. The employee earned $50,000 while working in Alberta and $25,000 in Ontario. Since this is more than the 2011 maximum insurable earnings ($44,200), how do I complete box (24) on each T4?
Answer: If an employer is issuing more than one T4 because an employee worked in more than one province or territory in the year, the employer must report the insurable earnings used to calculate the employee’s EI premiums, up to the maximum insurable earnings, for the period of employment in that province.
On the Alberta T4 for this employee, enter $50,000 in box (14) (employment income) and $44,200 (the 2011 maximum insurable earnings) in box (24).
On the Ontario T4, enter $25,000 in box (14) and $0 in box (24) since the employee already earned the maximum amount used to calculate EI premiums while working in Alberta. Beginning with 2011 year end reporting, employers should never leave box (24) blank.
Paying retiring allowances to non-residents
Question: We are paying a retiring allowance to an employee who is not a Canadian resident. How do we calculate the source deductions?
Answer: Retiring allowances are not subject to C/QPP contributions or EI or QPIP premiums. For income tax, deduct 25 per cent of the amount of the retiring allowance and send it to the receiver general on behalf of the non-resident. The percentage may be lower if Canada has signed a tax treaty with the country in which the employee is a resident. Keep in mind that the individual may transfer all or part of the retiring allowance tax-free to a registered pension plan (RPP) or registered retirement savings plan (RRSP) in which he or she is the annuitant. In such a case, you would only withhold tax on the amount not eligible for transfer.
Annie Chong is manager of the payroll consulting group at Carswell, a Thomson Reuters business, which pub- lishes the Canadian Payroll Manual and operates the Carswell Payroll Hotline. She can be reached at [email protected] or (416) 298-5085.
