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CPP election to quit paying at age 65


BLSM
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The CRA says -

If you are self-employed, you must complete the applicable section of the CRA's Schedule 8 CPP contributions on Self-Employment and Other Earnings and file it with your Income Tax and Benefit Return.

What I need to know, is where and how do I actually show this in my tax return?  Because we are self-employed, the S8 is automatically included, but I can't find anywhere to tell the system I want to quit paying! 

Do I just add it manually into the S8 that the system prints out?  That won't work, because then UFile won't adjust the amounts I need to pay for 2020.  And, since my b'day was in December, it probably doesn't matter for this year, but how will I KNOW that CRA has the info needed?

Has anyone done this?  Any suggestions?

Thanks!

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Hi BLSM, as a self-employed individual, if you do not wish to contribute to the CPP, please follow the steps below:

1- On the "Left side menu on the Interview tab", select the "Controls" option. 

2- On the "Canada Pension Plan" section, under "If you had employment earnings:", go to the question "Did you make a CPT30 election in 2020?". If you had both employment income and self-employment income in 2020 and wanted to elect to stop paying CPP contributions in 2020, answer "Yes" from the drop-down menu, then enter the election date.

3- On the section, "If you had self-employment income (see help?)", go to question "Did you want to stop contributing to the CPP on self-employment income?".

4- For the question, "If you answered Yes to the question above, enter the election date (01-mm- 2020 ) to stop contributing to the CPP (Schedule 8 L.50372) or to revoke an election made in a prior year to stop contributing to the CPP (Schedule 8 L.50374) ", click on the drop down menu and select "Elect to stop contributing to the CPP"and in the box to your right enter the date "(dd-mm-yyyy).

5 - Click on "Next" at the bottom of the page.

Schedule 8 will be generated by the program. In Part 3, the software will calculate your CPP contributions on employment income. In Part 4, the software will calculate CPP contributions on self-employment income and you had no employment income. In Part 5, the software will calculate for the CPP contribution on self-employment income, when you had an employment income.

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Hello again

I am working on my taxes again, and I am getting a warning - 

It tells me I have entered a date to stop contributing to CPP, but I do not qualify.  The date I entered is not considered by UFile.

I entered Dec. 1, 2020 in the ONLY self-employment income section.  We both turned 65 in December, and the CRA says we cannot enter a date BEFORE the month we turn 65.

Our only income is from CPP, Self-employment, rental property, and CERB (entered under other income).   Is the CERB prompting this error, as it's not under the self-employment section?  We had no actual T4 employment income at all in 2020.

thanks

Brenda

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  • 2 weeks later...

Thank you.  I guess the wording isn't clear on the CRA site.  When they say you can't choose a date before the month you turn 65, they suggest you CAN choose the month of your birthday.

Do I then choose the date of Jan 2021, or will that be allowed?  Do I have to wait until next year's taxes to fill that part in?

Thank you.

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Hi BLSM. You have to wait till next year. The reason is that the self-employment/work income requires a CPP contribution up until the month after you turn 65. If you were in Quebec you could not opt out like the rest of Canada. So in the rest of Canada self-employed people should opt out after they turn 65. But if you were an employee and still working it might be better to not opt out as your employer will be required to contribute 50% of the total towards your CPP.  

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Hi Brenda, I may have been too quick to reply thinking you still had employment as well as self-employment income. It appears that for all of 2020 you had only self-employment income that would require CPP contributions. You should in this case be able to opt out for the month of December. In Box 50372 on Schedule 8 you will need to enter "12" for the month. That should prorate your CPP contributions on the self-employed income effectively requiring you to pay CPP on 11 of the 12 months income.

Look again at Nawal's post above.

From a previous post by Nawal

“3- On the section, "If you had self-employment income (see help?)", go to question "Did you want to stop contributing to the CPP on self-employment income?".”

“4- For the question, "If you answered Yes to the question above, enter the election date (01-mm- 2020 ) to stop contributing to the CPP (Schedule 8 L.50372) or to revoke an election made in a prior year to stop contributing to the CPP (Schedule 8 L.50374) ", click on the drop down menu and select "Elect to stop contributing to the CPP"and in the box to your right enter the date "(dd-mm-yyyy).”

Also as per CRA

 

From CRA Schedule 8

“If you had only self-employment income for 2020 and elect in 2020 to stop paying CPP contributions on your self-employment earnings, enter the month in 2020 for which you choose to start this election in box 50372 on the next page. The date cannot be earlier than the month you turn 65 and you are receiving a CPP or QPP retirement pension. For example, if you turn 65 in June, you can choose any month from June to December. If you choose the month of June, enter 06 in box 50372 because June is the sixth month of the year.”

In your case you would select December and as mentioned you would enter "12" in box 50372

 

 

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That is what I did previously, and I got the warning message saying UFile was disregarding the date.  See my post of Jan. 26.

Anyway, I just now went back into the program, Controls.  That message about not considering the date was no longer there, and a new message said I had to answer Yes or No to the 'employment' part about filing that form CPT30.  

Although we had no employment income, I answered NO to that question, and the message went away. 

I'll be back if something is different NEXT time I sign in!    Thanks for your help.

Brenda

 

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I am 66, have self employment income and do not wish to contribute to CPP.

I went to controls and answered Yes/Stop Contributing to CPP/Jan 1, 20 under CPP/Self Employment income.

But when I redo the tax calculation, the CPP payment is still there and schedule 8 , part 2 shows CPP applying for 12 months.  

This does not change regardless of what I enter in the controls section.

Suggestions?

Mike

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Mike, see my post above yours.  I had the same problem, only with December.   I added in "NO" in the employment income part, where it asks if you've filed an election before.  Now, my S8 shows 11 months eligible and starting to stop payments in 12 (Dec.)

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  • 11 months later...

I noticed all these threads are regarding self employed income.  What if you have a corporation and are paying yourself a salary?  Is there a way to avoid paying into CPP at age 65?  I would already be at my maximum CPP and adding more will not increase my payout.  Also, I would like to defer my CPP to 70.  If this cannot be done would paying myself dividends be the best solution?

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Hello DBF,

Take a look at this  https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/cpp/you-stop-contributing-cpp.html

Once you reach the max CPP threshold as an employee (through your corporation), or self-employed, you won't pay anymore into the CPP plan.

You can opt out at 65 as per the link above (unless you are in Quebec).

You should not apply for CPP if you want to defer your CPP benefits (receipts) until 70.

Paying dividends will not attract any CPP required payments. That said however you will not also earn any RRSP eligibility. You need to carefully analyze the use of a corporation to pay salary and opt out of CPP from any after tax situation versus the future benefit at 65. You also need to review the RRSP eligibility for salary versus dividends and the total corporate and personal taxes. Not an easy process and it depends on your overall retirement goals.

Trust that helps.

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