What is Canada Pension Plan (CPP)?
Canada's mandatory contributory social insurance program providing retirement, disability, and survivor benefits.
Definition
The Canada Pension Plan (CPP) is a mandatory social insurance program that covers virtually all employed and self-employed persons in Canada (except Quebec, which has the QPP). Both employees and employers contribute, similar to US Social Security. For cross-border taxpayers, CPP has special implications under the US-Canada Tax Treaty and Totalization Agreement, which can prevent double social security taxation.
Who Needs to Know This?
All employed and self-employed persons in Canada aged 18-70. US citizens working in Canada need to understand CPP's interaction with US Social Security under the Totalization Agreement.
Key Deadline
CPP contributions are deducted from each paycheck; self-employed pay with T1 filing
Potential Penalties
Interest on late CPP contributions for self-employed individuals
Related Forms
Common Mistakes to Avoid
- 1Paying into both CPP and US Social Security without Totalization Agreement relief
- 2Not understanding CPP benefits are taxable income for US purposes
- 3Self-employed not calculating CPP contributions correctly
- 4Not obtaining a Certificate of Coverage when required
Related Terms
Harsh Agarwal, EA · IRS Enrolled Agent
Reviewed for accuracy by Zenith Financial Advisors
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