Claiming Medical Expenses: Free Healthcare?

Free Health Care? Did you know that Canadians spend on average more than $1,000 on medical expenses each year? It’s estimated that government programs, via our taxes, cover about 72% of medical expenses, which means that we pay for the rest. Your clients may be over-paying on their taxes because they don’t know about medical expense deductions. 

Tomorrow ó March 29 ó is the federal budget and the federal government will balance its need to generate revenue to reduce the deficit with maintaining a fragile economic recovery. Knowledge Bureau Report's team of experts will examine the budget, access the changes and tell you what it all means to you. Watch for Budget 2012 Special Report.  

Can a bank be held liable by victims of fraud if the fraudster was a customer of the bank and carried out his fraud using various bank accounts, in the process arousing concerns by bank staff? We will soon find out as, on Aug. 15, the Ontario Superior Court of Justice approved a class-action lawsuit against the Bank of Montreal (BMO). The lawsuit, Pardhan v. Bank of Montreal, alleges that BMO is culpable because Salim Damji, who defrauded investors of more than $77 million from 1999-2002, deposited the stolen money into various personal accounts at various BMO branches, as well as into an account in the name of a numbered company operating as Cash Plus. Many investors' cheques were written "in trust,î yet Damji deposited them into non-trust accounts. The suit maintains that BMO knowingly assisted this breach of trust, knowingly received the fraudulent funds and/or was negligent in its receipt of these funds. Damji, a resident of Toronto, claimed that his company, STS Inc., had recently developed a new teeth-whitening product that was soon to be sold to industry giant Colgate-Palmolive. He offered investors the chance to buy into his company before the sale, putting the money "in trustî until the deal was inked. Damji must have been very persuasive, as he was able to extract more than $77 million from investors. But it was all a lie ó there was no teeth-whitening product, no sale to Colgate, not even a company and certainly no money in trust. On April 26, 2002, Damji was arrested and charged. He pleaded guilty and was sentenced to seven and a half years in jail. He left behind a web of thousands of transactions but little cash. Damji had an internet gambling habit and had transferred funds offshore This recent decision represents the culmination of many administrative battles within the court system itself. Ruling that the litigation plan was deficient, the court had declined to certify the proposed class action as recently as April 2012.After considering additional evidence, the court has decided to certify the proceeding. Those investors who gave money to Damji for the STS scheme in trust and whose money was deposited in the Cash Plus account, will be represented in the action.  

Statistics Canada's closely watched indicator, the Consumer Price Index (CPI) added 0.5% in January, taking inflation to 2.5% for the 12 months ended January. The Bank of Canada's core index, at 2.1% for the same period, was right on target, suggesting no policy changes are forthcoming. "The 2.1% reading on core inflation,î says Douglas Porter, deputy chief economist at Bank of Montreal, "brings us right back to where the Bank of Canada expected it to be for the first quarter in its January Monetary Policy Review. Headline inflation at 2.5% is still above its call of 2.2%, but it should drop notably by March.î The culprits driving inflation are higher gas and food prices. Gasoline prices increased 6.8% in January while food prices for food purchased from stores rose 4.9%. Year over year, food prices rose 4.2% while the cost of energy advanced 6.5%. The electricity index rose 7.3%. In fact, prices rose in seven of the eight major components in the 12 months, the exception being recreation, education and reading. StatsCan notes that, excluding food and energy, consumer prices increased 1.6% in the 12 months to January after rising 1.3% in December.   Additional Educational Resources:  Debt and Cash Flow Management and Elements of Real Wealth Management courses.  

Canadian politicians, regulators, financial institutions and lobby groups are making their voices heard in protest against the "Volcker Rule,î the U.S. legislative response to the financial skullduggery of 2008. The Volcker Rule ó Section 619 of the Dodd-Frank Act ó will prohibit U.S. financial institutions from proprietary trading, that is, trading for their own accounts, and from owning, sponsoring or having certain relationships with a hedge fund or private equity fund. There is no doubt the proposed rule is well intended but how the rule will be applied come July 21 has stirred up controversy globally about U.S. protectionism and aroused concerns about "unintended consequences.î Canadian and international leaders fear the proposed rule may undermine rather than support efforts to get the global financial system on sound footing. The Investment Funds Institute of Canada (IFIC), representing Canadian's mutual fund industry, weighed in on the eve of the deadline for comment. Its concern: the proposed rule's definitions of "covered fundsî and "resident of the United States.î IFIC wants public mutual funds clearly distinguished from hedge funds, private equity funds and covered funds, and Canadian snowbirds and other temporary U.S. residents excluded from the definition of "resident of the United States.î "As drafted, the Volcker Rule erects a barrier between the Canadian mutual fund industry and its Canadian clients,î IFIC president Joanne De Laurentiis said in a press release, "especially among our retiree, snowbird population.î In his letter to U.S. Secretary of the Treasury Timothy Geithner, federal Finance Minister Jim Flaherty reiterated De Laurentiis's concerns: "Without a change to the rule, a Canadian covered banking entity could be precluded from continuing to sponsor such a fund if it had unit holders resident in the U.S., even temporarily.î But Flaherty and Bank of Canada Governor Mark Carey also have broader concerns that centre on the liquidity and resiliency of Canadian financial markets. In his Feb. 13 letter to Ben Bernanke, chairman of the U.S. Federal Reserve, Carney pointed out: "The proposed rule appears to extend well beyond U.S.-insured depository institutions and imposes significant restrictions on Canadian banking entities by limiting their use of U.S.-based resources, personnel and market infrastructure and by preventing them from trading with U.S. counterparties.î Says Flaherty in his letter: "The Volcker rule could apply to transactions between Canadian banks that are simply facilitated by U.S.-based financial infrastructure, such as U.S. clearing houses.î Carney points out three potential consequences of the proposed rule: ï Canadian banks market-making and risk-management activities may be limited. ï Trading in Canadian government bonds may be impaired, restricting competition and liquidity in these markets. ï The use of U.S.-based global market infrastructure may be curtailed, hindering progress in implementing global initiatives to promote financial stability. He recommends two changes: ï The "solely outside of the United Statesî exception should be predicated upon whether the activity entails risk for a U.S.-insured depository institution and not incidental connections with U.S. entities or infrastructure. ï Canadian government securities, including securities issued or guaranteed by the federal and provincial governments, should be exempt from proprietary trading restrictions. Tessa Wilmott is a financial journalist and editor of Knowledge Bureau Report.   Additional Educational Resource:  2012 Distinguished Advisors Conference in Naples, Florida  

The arrival of T4 and T5 slips ó by the end of February ó signals the official start of the annual tax-preparation rush. One important rule you and your tax preparer will want to follow is completing all family tax returns together, starting with the lowest-earning family member and progressing to the highest. This will allow you to take advantage of provisions for transferring income to children and provide savings opportunities for the young. Filing returns for minors. There are many reasons to file a tax return for minors. First of all, your minor child is taxable and required to file a return if he or she earned $10,822 or more in 2011, be it income from employment (for example, working at a local restaurant) or self-employment (babysitting and lawn-care services). But even if your minor's income doesn't meet that threshold, filing a return is important. Each year, 18% of his or her earned income will go toward creating RRSP contribution room; in time, when the child does become taxable, he or she will be able to contribute to an RRSP creating a RRSP deduction that will reduce income and taxes. This is important planning tool if you are going to be the one supporting your child when he or she attends post-secondary school. Before unabsorbed educational credits can be transferred to you, the student must first claim tuition, education and textbook credits to reduce his or her taxable income to zero. An RRSP deduction will reduce the student's income, allowing you to transfer more of the credits to your return.   Your minor child also needs to include in income any survivor and/or disability benefits from the Canada Pension Plan. This will boost his or her net income. If you are a single parent, this could be particularly significant because the claim for "eligible dependentî or spousal equivalent for tax purposes will be reduced or eliminated. But there is a tax special provision for minors available only to single parents: you can transfer taxable Universal Child-Care Benefits (UCCB) to the child, and he or she can include it in income. This will be of advantage to you if you are in a higher marginal tax bracket than the child. It's Your Money. Your Life. File tax returns for all family members together, including minor children. The objective is to maximize the tax free zone of $10,822 and, if necessary, reduce income levels further with an RRSP deduction. What's required is that the minor has eligible RRSP room, which is created by filing a return. This filing strategy can create savings on a supporting parent's return as well, with the transfer of certain available tax provisions ó to the benefit of the entire family unit. Next Time: Making claims for minor children on your return Evelyn Jacks, president of Knowledge Bureau, is author of Essential Tax Facts 2012 and co-author of Financial Recovery in a Fragile World. To purchase your books, visit www.knowledgebureau.com/books  

Canada Revenue Agency recently released new rules concerning Registered Disability Savings Plan (RDSP) and the taxation of withdrawals from the plan. In a five-part series, Knowledge Bureau Report will examine RDSPs and explore the tax implications of the new rules. In this first report, Greer Jacks looks at what payments from RDSPs are taxable. Contributions. A plan holder(s) is the person or persons who opens the account on behalf of the disabled person, who becomes the plan's beneficiary. There is no limit to the amount the plan holder(s) can contribute annually to an RDSP, but the overall lifetime limit for a beneficiary is $200,000. Plans can qualify for a Canada Disability Savings Grant and the Canada Disability Savings Bond, as well as designated provincial programs, which are outside the contribution limit. Contributions can be made to the plan until the end of the year in which the beneficiary turns 59. A beneficiary can only have one RDSP at any given time, although the RDSP can have multiple plan holders throughout its existence. Payments. Three types of payments can be made from an RDSP: disability assistance payments (DAPs), repayments of grants and bonds to the government, and transfers of all property from the beneficiary's current RDSP to a new RDSP for the same beneficiary. Only the beneficiary or the beneficiary's legal representative acting on the beneficiary's behalf can receive DAPs, which is the only type of payment that is taxable. The beneficiary must include those amounts in his or her annual income. Reporting the income. When payments are from the RDSP, RDSP issuers report the taxable part of the payments from the plan in box 131 of the T4A slip, located in the "Other informationî area, and send two copies of the slip to the beneficiary or the beneficiary's legal representative. The beneficiary must include this amount as income on line 125 of his or her tax return for the year in which he or she receives it. For more details, see CRA's information circular IC99-1, www.cra-arc.gc.ca/E/pub/tp/ic99-1/ and CRA publication RC4460 www.cra-arc.gc.ca/E/pub/tg/rc4460/. Greer Jacks is updating jurisprudence in the EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.