# Situation after CPP\EI ruling



## solncer (Mar 5, 2013)

Hi everyone!
Any advice in my situation would be really appreciated:

I worked for my employer (he considered me as a self-employed) about 7 months in 2012 and was paid gross salary, no deductions. Recently CRA performed a CPP\EI ruling and made a decision that I was an employee. 

My employer gave me T4 form for 2012 along with letter which informed me that now I owe him money (around $2000). My employer said he has paid my part for CPP and EI contributions for 2012 year , so now he wants those money back.

Is it legit to ask me for money or it's sort of scam? 

He didn't give me any breakdown on requested sum, just give me the letter which states that CRA advised him that I'm as an employee responsible for my portion of CPP and EI and asked me for cheque.


I'm not sure what to do now, I don't trust him and I would prefer to pay any required contributions and taxes to CRA directly rather to deal with my former employer.

This is really odd situation for me, any thoughts?


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## OptsyEagle (Nov 29, 2009)

Is he asking for you to pay your share of the EI & CPP contributions, or both your share AND the employer's share of the EI and CPP contributions.

Many amateur employers believe that they can just choose to consider someone an employee or self-employed. This is obviously not correct. Now if this employer had of done things correctly and considered you an employee, he would have deducted CPP and EI deductions from your pay, like any other employee. So yes, you do owe that money and should know that a credit has been made in your name for both CPP and EI. 

These programs not only require the employee to contribute but also require the employer to pay amounts in addition to what you pay, into those two programs. That is what he owes, as the employer, and you do not owe him anything for that. You will owe him only what is recoreded on your T4 slip for EI and CPP contributions.


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## OptsyEagle (Nov 29, 2009)

I should probably add, that although you technically do owe him this money, if you are not working for him anymore, I doubt I would be too quick in paying him. It was his mistake. I just wanted to answer your question, that what he is asking for is what he should have been taking from each of your paycheques, all along.


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## MoneyGal (Apr 24, 2009)

I would not "repay" him. He didn't seek an advance ruling from CRA with respect to his plans to engage you as a self-employed person; and when CRA reviewed his arrangements, they concluded you were an employee for whom these remittances had to be paid, not a self-employed person for whom no remittances were due. There is no way in heck I would consider "repaying" the sums he remitted on your behalf.


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## solncer (Mar 5, 2013)

Thanks OptsyEagle for quick response 



OptsyEagle said:


> Now if this employer had of done things correctly and considered you an employee, he would have deducted CPP and EI deductions from your pay, like any other employee.


I don't work for him since August last year, last paycheck I got from him was about half year ago.



OptsyEagle said:


> Is he asking for you to pay your share of the EI & CPP contributions, or both your share AND the employer's share of the EI and CPP contributions.


He didn't explain this to me, but amount he wants is more then in T4 form, but less then I would be paying as a self-employed, so I have no idea what his math was. He mentioned that he had to pay a lot of penalties to CRA because of CPP\EI ruling result, so may be he wants to put some expenses on me, but it just my guess.

I realize I have to pay taxes to CRA because no deductions has been made, but my problem is not about paying or not paying. Question is - to whom? I just dont feel secure with my former employer and I would rather pay whatever I owed to CRA directly. In this case, even if he overpaid something for me, he gets a refund. Is there any way I can pay off my taxes, CPP etc without dealing directly with my former employer?


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## solncer (Mar 5, 2013)

MoneyGal said:


> I would not "repay" him. He didn't seek an advance ruling from CRA with respect to his plans to engage you as a self-employed person; and when CRA reviewed his arrangements, they concluded you were an employee for whom these remittances had to be paid, not a self-employed person for whom no remittances were due. There is no way in heck I would consider "repaying" the sums he remitted on your behalf.


But letter he gave me states that CRA advised him that I'm as an employee responsible for my portion of CPP and EI and asked me for cheque. Otherwise how come he would give me official and signed letter. And technically I do owe money for CPP, because it was never deducted, I just don't want pay it via his pocket.


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## solncer (Mar 5, 2013)

Sorry for off top - just noticed that this tread I just started in Taxation topic is jubilee - №1000. May be this brings me some lack :hopelessness:


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## jcgd (Oct 30, 2011)

The employer should only pay what they owe to the government and you would be responsible to pay what you owe. If the employer did pay your portion on your behalf I would confirm this the CRA and require proof from the employer. I would pay directly to CRA.


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## solncer (Mar 5, 2013)

jcgd said:


> I would pay directly to CRA.


This is exactly what I want. But how to put in tax forms and calculate it correctly? Which forms should I fill?


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## MoneyGal (Apr 24, 2009)

solncer said:


> But letter he gave me states that CRA advised him that I'm as an employee responsible for my portion of CPP and EI and asked me for cheque. Otherwise how come he would give me official and signed letter. And technically I do owe money for CPP, because it was never deducted, I just don't want pay it via his pocket.


Yes, and where do you think "your share" comes from? It comes from your total compensation paid by your employer. 

Think about it this way: if you are offered a salary of, say, $35,000, then what you receive as take-home pay is your gross salary, less mandatory withholdings such as income tax, CPP and EI and any optional benefits, such as employee-paid benefits.

Your CPP and EI remittances are due as part of your total compensation package from your employer. I understand that your employer did not seek an advance ruling from CRA about your employment status (which he should have). As a result, he is responsible for remitting the premiums he failed to remit on your behalf. These are remittances made on your behalf by your employer. He took the risk of not seeking an advance ruling; the net impact for him is that your total compensation has now retroactively gone up because he remitted to you some funds which should have been sent to CRA instead. 

If you got a bill from CRA asking you to pay the amounts (you won't), I'd pay it. A bill from a former employer who got caught? Forget it.


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## solncer (Mar 5, 2013)

Thanks MoneyGal



MoneyGal said:


> If you got a bill from CRA asking you to pay the amounts (you won't), I'd pay it. A bill from a former employer who got caught? Forget it.


Do you think he is just bluffing when saying "CRA advised" that I owe him money? The letter looks very official. For example if I ignore his letter, can he sue me? What do you think?


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## marina628 (Dec 14, 2010)

I would like to weigh in on this matter as well as have a real life example of what happens when employer does not pay the proper amount.I do the paychecks for my husband and myself and I remit the source deductions for 2 corporations we both own.
In 2011 I had a blond moment as when i did my husband year end bonus cheque and the system spit out the CPP amount I had to remit ,I deducted what I paid on Company A source deductions from Company B source Deductions thinking I can combine the 2 to get the max CPP.
When we filed the T4 ,CRA sent Company B a bill for over $1300 which was the company portion and Employee Portion .When I showed it to our CGA for clarification on what I had to do ,she said we had to pay it from Company B and not to deduct employee share from my husband's pay.


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## MoneyGal (Apr 24, 2009)

But CRA did not advise him that you owe him money. CRA advised him that HE owed them money, which they extracted from him. It represents your share of EI and CPP premiums, but it should have been deducted from your gross pay and remitted by him. He's trying to turn around and extract that money from you in turn, and I don't blame him, but CRA didn't tell him to do that. At least not in any official capacity.

By the way - did you take deductions against that income? Has CRA audited you yet?


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## solncer (Mar 5, 2013)

MoneyGal said:


> By the way - did you take deductions against that income? Has CRA audited you yet?


No and no.

Because its about 2012 year I didnt file taxes yet.

With CRA - I got phone call from them, they asked couple questions about my working arrangements, and within couple of weeks I got a letter from them that my income from that source is considered employment, not self. I call back them and asked what should I do next and they said I have to wait for T4 form and after just file my taxes, no penalties for me. May be they will do audit later on.

I'm thinking, may be I should report this income as self-employment, just because this way I can fill Schedule 8 form, pay my CPP and EI in full, and after CRA will recalculate and give me back overpayment (if any). In this case I will not fill guilty about someone paying taxes for me. But I'm not sure if CRA will appreciate this way of filing taxes. I'm confused :distress: :hopelessness:


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## MoneyGal (Apr 24, 2009)

NO. Do NOT report this as self-employment income. Wait for your T4. Your CPP and EI deductions will show on your T4 - that's what your ex-boss paid and is looking for from you. 

I missed that this all happened in 2012. If you don't get a T4 from your former employer, contact CRA and request a copy.


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## solncer (Mar 5, 2013)

I have T4 already, my former boss gave it to me along with letter.
But amount of CPP and EI deductions he wants is more then in T4 form, but less then I would be paying as a self-employed, so I have no idea what his math was. He mentioned that he had to pay a lot of penalties to CRA because of CPP\EI ruling result, so may be he wants to put some of those penalties on me, but it just my guess.


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## MoneyGal (Apr 24, 2009)

solncer said:


> I have T4 already, my former boss gave it to me along with letter.
> But amount of CPP and EI deductions he wants is *more then in T4 form, but less then I would be paying as a self-employed*, so I have no idea what his math was. He mentioned that he had to pay a lot of penalties to CRA because of CPP\EI ruling result, so may be he wants to put some of those penalties on me, but it just my guess.


How much you would have paid as a self-employed person is (1) irrelevant, because you were not self-employed, and (2) not something your former employer would know in any case. How does he know what your deductions against that income might have been as a self-employed person? 

He took a risk, broke the law, got fined, and now he's trying to pass some of his costs on to you. I just don't understand why you'd even contemplate reimbursing him for some of his costs. You can't deduct any payment you'd make from taxable income; it would just be a pure loss to you. I understand the argument he's trying to make, and I'm sure it sucks to be him, but ... why would you make this your problem?


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## solncer (Mar 5, 2013)

First, when I got a letter from him, I considered it official document, but after reading a lot about this topic, I start thinking, he just trying to trick me.

Second, the moral issue - basically postfactum turns out I got paid more than supposed to be at the beginning, even it happens because of greediness of my former boss, not because of me (I guess no need to explain that paying me no deduction salary wasn't my idea at all)


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## MoneyGal (Apr 24, 2009)

I'm actually sympathetic to the moral issue. IF you felt like reimbursing him, you might consider some portion of the CPP/EI premiums he was supposed to be remitting on your behalf.


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## OptsyEagle (Nov 29, 2009)

Well, I might as well weigh in again. 

Definitely, do not declare yourself, self-employed on your taxes. You have already been told (warned against this) by CRA, not to do this.

All you owe, is the amounts in the two boxes on your T4. NO MORE, NO LESS. Anything else, is wrong. It does not matter what kind of math your employer is doing, my math is the correct math. Trust me. Others here can confirm if it makes you feel better.

The reason employers want to call you self employed is to avoid paying the employer's share of EI and CPP and to avoid the administrational details of making payroll remittances to CRA. Since CRA knows this, they go after these people harshly. They hope they tell all their employer friends, you know what mean. That is not your problem, it is his. You have not made any mistakes here, so don't start by calling yourself self-employed.

Personally, I would not make any payments at all. This guy sounds kind of flaky and I wouldn't trust him to make the payments to CRA, on your behalf. Unfortuneately, I do not believe there is a mechanism for you to pay CRA directly. So, your fallback. Don't pay anyone.


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## Charlie (May 20, 2011)

solncer said:


> I have T4 already, my former boss gave it to me along with letter.
> But amount of CPP and EI deductions he wants is more then in T4 form.


He's overpaid you by the CPP and EI deductions he's now made on your behalf. I can see him asking for reimbursement of this amount but no more. 

There's nothing for you to pay directly to CRA since it's already been paid -- otherwise he couldn't report it on the T4. Any other costs or penalties are his alone.


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## solncer (Mar 5, 2013)

OptsyEagle said:


> Personally, I would not make any payments at all. This guy sounds kind of flaky and I wouldn't trust him to make the payments to CRA, on your behalf. Unfortuneately, I do not believe there is a mechanism for you to pay CRA directly. So, your fallback. Don't pay anyone.


Can send on me a collection agency than?


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## OptsyEagle (Nov 29, 2009)

What note did you sign where you said you would pay him this money. 

Anyway, pay him if you want, but just the amount on your T4s. You owe him no more. I hope for your sake, he has remitted it to CRA.


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## solncer (Mar 5, 2013)

OptsyEagle said:


> What note did you sign where you said you would pay him this money.


Didn't sign anything, he just gave me this letter, this is it



OptsyEagle said:


> I hope for your sake, he has remitted it to CRA.


That is exactly why I wanted to pay CRA directly


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## oedema (Jan 1, 2012)

Listen to the good advice you've been given here; 1. declare the income as employment income using your T4. 2. DO NOT give your former employer any money.


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## jcgd (Oct 30, 2011)

I just want to clarify something here. If my employer doesn't remit my personal portion of cpp, they are on the hook to pay it and they would have simply over paid me?

So employer pays some cpp on their end, which has nothing to do with me personally?
Employer takes my portion of cpp payable off my gross pay. If they fail to do this they must cough it up, not me?


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## solncer (Mar 5, 2013)

*jcgd*, this is what CAA web site says:


> _If the worker is an employee (employer-employee relationship), the payer is considered an employer. Employers are responsible for deducting Canada Pension Plan (CPP) contributions, EI premiums, and income tax from remuneration or other amounts they pay to their employees. They have to remit these deductions along with their share of CPP contributions and EI premiums, to the Canada Revenue Agency.
> 
> *An employer who fails to deduct the required CPP contributions or EI premiums has to pay both the employer's share and the employee's share of any contributions and premiums owing, plus penalties and interest.*_


http://www.cra-arc.gc.ca/E/pub/tg/rc4110/rc4110-e.html#employee_selfemployed

I guess this describes my situation as well.


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## OptsyEagle (Nov 29, 2009)

That is because CRA wants to put the onus on the employer. If they didn't, then anytime an employer didn't withhold these amounts and remit them, CRA would then have to go after the employee for these amounts. Most likely for 1/2 the country or more, those amounts will have been spent a long time ago. They do not want to do this. This is why they made the rules the way they are.

This was and is your employers responsibility. Probably the only reason he wanted you to be self-employed was so he didn't have to pay the employer's share of these plans on your behalf. That is what he thought of your need for EI and retirement income...or he was just stupid.

Either way, I would dismiss it. If you are going to lose sleep over it, then definitely don't pay more then you were required to, which is the amount listed on your T4 slips.


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