2017-04-05 00:00:00RetirementEnglishWorking for yourself brings added tax responsibilities. Check out what you need to know about Canada Pension Plan Contributions.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/Self-Employed-Entrepreneur-Can-Contribute-To-Canada-Pension-Plan.jpghttps://quickbooks.intuit.com/ca/resources/future-planning/cpp-contributions-self-employed-entrepreneurs/Canada Pension Plan Contributions for Self-Employed Entrepreneurs

Canada Pension Plan Contributions for Self-Employed Entrepreneurs

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Workers between the ages of 18 and 70 must contribute a portion of their wages to the Canada Pension Plan. As of 2017, contributions are 4.95% of earnings over $3,500 and up to $55,300. Both the worker and the employer contribute this amount. If you are self-employed, you must pay both your portion and the employer’s portion. As of 2017, you pay 9.9% on pensionable earnings. For example, if you only earn $3,000, that’s under the threshold and you pay nothing to the CPP. If you earn $40,000, you subtract the $3,500 and pay into the CPP on the remaining $36,500. That makes your annual contribution $3,613.50 ($36,500 * 9.90). To calculate your annual CPP contributions as a self-employed person, use Schedule 8 and transfer the numbers as directed to your personal tax return. If you’re required to pay quarterly taxes, your CPP contributions are part of your payments, but you don’t need to calculate the exact amounts until tax time. If you live in Quebec, you don’t need to make CPP contributions. This province has its own retirement plan – the Quebec Pension Plan. QPP works basically the same way as the CPP, but the exact numbers are different. For instance, as of 2017, self-employed workers in Quebec pay 10.8% contributions on earnings between over $3,500 and up to $55,300. Double CPP contributions are just one of the extra costs of being self-employed. Before launching your own business, you may want to investigate other expenses as well.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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