# EI Hiring Credit with sole proprietor



## yyzvoyageur (Apr 10, 2009)

Hi all,

Since we hired a live-in caregiver, I've been running a small business in the eyes of the CRA. The day after filing our nanny's T4 with CRA I noticed a credit on my small business account for the EI Hiring Credit. It's a total of the employer's portion of our 2011 EI contributions. Great! Now I called CRA this morning and was told I can use that credit to offset future money I owe on that account. In other words, next month I won't be doing my monthly remittance, and in March I'll be remitting a smaller than normal amount, until the credit has been used up. Also, I understand that this amount is "business income". The CRA agent told me that since I'm a sole proprietor, I simply declare it as income on my personal income tax return for next year. I wouldn't be filing a business income tax return (just the T4).

Does that all sound right to you?


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## MoneyGal (Apr 24, 2009)

WHAT is business income? Tax credits are not income in any way, shape, or form. You don't declare them on a tax return - they are credits that reduce your taxes, not income you declare and then get taxed on in an infinite loop.


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## yyzvoyageur (Apr 10, 2009)

MoneyGal said:


> WHAT is business income?


I haven't a clue, but according to CRA:



> If you receive a HCSB [hiring credit for small business] payment, you have to claim that amount as income or reduce your EI expense when you file your business return, even if we transferred some or all of this credit to pay off a debt.


Link (under the heading "HCSB is business income")


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## MoneyGal (Apr 24, 2009)

Holy crumb! That is a bizarre tax credit. I need to take back what I wrote. 

Hopefully someone else (StarDancer? Charlie?) will come around with an answer. You can also phone CRA and ask for advice. But if it is business income, I doubt the answer will be to report it on your personal return.


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## Charlie (May 20, 2011)

It's actually pretty standard stuff. Co-ops have the same rules for member rebates.

Essentially, they're saying the amount is a reduction of your expense. So if EI was a business expense and you deducted the full employer EI, you now have to add the credit back...For a sole proprietor, it would either reduce the EI you claimed, or, alternatively you'd record it as revenue. The effect is the same. You can only deduct what you're out of pocket.

For a nanny, it's probably moot unless your nanny costs were less then your deduction limits, which is rare. It means you cannot deduct the full employer EI otherwise calculated because you didn't pay it. So your childcare costs are the amounts you paid less the EI credit you received back. There's no additional addback to business income since amounts in excess of the deduction limits are deemed personal expenses.


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## MoneyGal (Apr 24, 2009)

Shows how much I know.


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## yyzvoyageur (Apr 10, 2009)

Sounds good to me. Thanks!


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