Understanding Payroll Deductions: Personal Income Tax Rates, CPP/QPP, EI and Basic Exemption

The automation of the tax preparation and filing process has been a boon to individuals and tax preparers alike.   Gone are the days of struggling to find the right box on the return, adding everything up 5 times and still getting different results, and hoping that the CRA can read your chicken scrawl.  Present day tax software not only guides you through every step of the process, it also helps to optimize your allocations thereby reducing your taxes payable.  There is however at least one downside to automation: Since we are more removed from the actual calculations, our understanding of our tax situation is somewhat diminished.  We have an idea of what we expect to pay, which we can see every week on our paycheques (or for self employed individuals, the breathtaking moment when we see the final result on our tax return), but often we are not really sure how these amounts are derived.  Below is a discussion of the  tax rates, deductions and maximums to improve our comprehension of this somewhat complex topic:

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Quebec Parental Benefits for Self Employed Workers

Parental benefits in Canada are administered by Service Canada.  They fall under the EI program, and to receive benefits it requires opt in to the EI plan for self employed individuals. However, in Quebec, unlike the rest of Canada (a common theme with Quebec), parental benefits are administered by the Quebec Parental Insurance Plan (QPIP), which does not specifically require opt in.  Instead all workers in Quebec whether self employed or employees are required to pay premiums, based (similar to QPP) on their insurable earnings.  For the self employed, premiums are payable at a rate of 0.86% upto maximum insurable earnings of $62,000. 

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Tax Tips: Employment Insurance for Self Employed Individuals

In January, 2010 the Federal Government extended  Employment Insurance benefits to self employed individuals/small business owners.  The following represents some of the key details:
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