Have you or a family member ever tried to collect Employment Insurance after paying into it for years, only to be denied? If you own your business or you have family members working for you, you may be paying too much in Employment Insurance (EI) premiums. Here’s how to figure out whether you’re eligible for a refund.
Business owners: Insurable or not?
If an employee or officer of a corporation controls more than 40% of the corporation’s voting shares, they are automatically deemed uninsurable and should request a refund for any premiums paid in the last three tax years. If you own less than 40% of the voting shares, we recommend you complete the ruling process.
Family members: Insurable or not?
Often family members are deemed to be too close to the inner workings of the business. In other words, they are not dealing at arm’s length. By virtue of being related, family members may have more (or less) duties, responsibilities and privileges than a worker that is not related to you. For example, if you have a son who is a plumber at your business who is solely responsible to do plumbing, he might be considered arm’s length because he is doing the same job as a non-related plumber would. In that case, he would likely be insurable and you would not be eligible for an EI premium refund.
On the other hand, consider if your son does the plumbing but at the end of the day comes back and does the accounting, comes and goes as he pleases and is the only employee with a company truck. The extra responsibility and benefits are because he is your son, rather than a plumber that you hired. He is therefore not considered to be operating at arm’s length to your business, and you can request a refund of his EI premiums.
How to get a ruling and a refund:
The Canada Revenue Agency (CRA) determines “arm’s length” by having you request an EI Ruling. If your family member is deemed insurable, your business and your relative continues paying into EI. If they are deemed uninsurable, you can request a refund to receive premiums that both your business and your relative paid over the last three tax years.
Here are five steps to ensure a smooth Ruling and Refund process:
- Read the helpful hints in EI & Family Members: Are you paying too much?
- Complete and submit Request for an EI Ruling, CPT1 form.
- Complete and submit Request for a Refund form (PD24).
- An EI Ruling Officer will call and ask you and your relative questions to clarify if and how they are treated differently than a regular employee.
- Keep paying EI premiums until you get a ruling decision.
CAUTION: There are companies out there that may contact you and offer to get you an EI refund, but there is a cost for these services and there is no need to pay for support. The process is easy and Counsellors are here to help you each step of the way.