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. 

Canada Revenue Agency has released the 2011 version of the Business and Professional Income guide, which provides guidelines on reporting business or professional income for 2011. The guide updates three areas that affect the filing of returns for the self-employed for 2011. Filing Requirement for Partnerships Beginning in 2011, partnerships with less than six partners are no longer exempt from filing a T5013 Partnership Information Return.Instead, the requirement for filing the T5013 is based on the financial activities and nature of the partnership. This means that some smaller partnerships that have assets in excess of $5 million or have transactions (revenue plus expenses) in excess of $2 million will now be required to file returns.Likewise, all partnerships that have a partner that is another partnership, a corporation or a trust will be required to file a T5013. On the other hand, larger partnerships that do not meet these requirements but were required to file a T5013 in prior years may now be exempt from filing the form. Temporary Hiring Credit for Small Business Small businesses whose 2010 Employment Insurance premiums were $10,000 or less may be eligible for a credit up to the maximum of $1,000 against their increase in EI premiums for 2011 over those paid in 2010. Manufacturing and Processing ó Accelerated CCA The class 29 (straight line, 50% rate)inclusion of manufacturing and processing equipment has been extended to include eligible machinery that becomes available for use in 2012 and 2013. Such equipment would normally be included in class 43 (30% rate, declining balance).

Citing dire consequences without quick action, Finance Minister Flaherty warned this week that the debt to-GDP-ratio in many European countries is unsustainably high. Speaking to a business audience in Toronto this week, Mr. Flaherty said governments should practice what they preach to their own citizens: live within your means and save for a rainy day.The European debt problem "threatens not only Europe itself, but all countries,î said the Finance Minister. While several nations have received bailouts from the IMF and other bodies, the impact on the global economy is increasing as a result of larger economies moving to the centre of the crisis.This topic and its remedies are discussed in Financial Recovery in a Fragile World which explains world events and how Canadians can work within a Real Wealth Management framework to get their own financial house in order and build wealth despite volatile world financial events. The Knowledge Bureau's new Debt and Cash Flow Management Course will also assist financial advisors to become certified in helping Canadians with debt and cash flow management. Both the book and course will be available for distribution December 15. Knowledge Bureau Report Readers can pre-order today and save shipping and handling costs. 

Despite volatile times, Canadian workers were better off during the last economic recession than during the two recessions in the 1980's and 1990's. This news comes from an article released by Statistics Canada on September 20, 2011, which outlined the factors involved. Information was derived from the study "Workers Laid-off During the Last Three Recessions: Who Were They, and How Did They Fare?" In the early 1980s, 2.9% of workers were laid off either temporarily or permanently. In the 1990s, 2.7% of workers were laid off, while only 2.0% of employees were laid off between October 2008 and December 2010. Workers also fared better due to the fact that the last recession was also much shorter in duration than previous recessions. In terms of employment, it took 27 months to return to its pre-downturn level, while it took 40 months during the early 1980s and 53 months during the early 1990s. Education planning pays off in recessionary times. Common characteristics were found between workers who were more likely to be laid off. These workers were typically between 15 and 24 years of age, held no university degree, had less than two years of seniority, or were employed in the goods sector. Holding a university degree seemed to improve workers chances of finding a job in the short term. Seniority also played a factor, as well as initial expectations to be recalled. While many Canadian workers are still feeling the effects of the recession, conditions are slowly starting to improve.  Unemployment levels in 2011 continue to decrease overall, with minor fluctuations over time. The unemployment rate in Canada was last reported at 7.5 percent in November of 2011.   Additional Education Resource: Financial Recovery in a Fragile World book.  

The federal government has announced increases to federal tax brackets, non-refundable and refundable credits based on an indexing increase of 2.8% for 2012. This brings the Basic Personal Amount, Spousal Amount and Amount for Eligible Child up to $10,822. The latter two amounts will be further increased to $12,822 under the new Family Caregiver Tax Credit. The indexing adjustment also raises the top tax bracket up to $132,406; this is the amount of taxable income that will be subject to the top federal tax rate of 29%. Planning for tax free zones, income ceilings for income-tested programs andinter-family use of transferrable tax creditswill be the subject of the January T1 Tax Update. For more information see Distinguished Advisor Workshop  

In an attempt to quell the litany of litigation in the Tax Court of Canada, the Government is now accepting advice as to how to deal more efficiently with the caseload. Some might argue that which is really needed is a simplification of taxation legislation. While there is no easy way to legislate on the plethora of issues covered by our current legislation, a review of whether everything in our legislation is necessary may also be useful. Some of the proposals already on the table include (from the Department of Finance): ï Update the monetary limits for access to the informal appeal procedure, providing taxpayers with greater access to a simplified and cost-effective judicial process and enabling a better balance in the Tax Court of Canada's caseload. Under this proposal, a taxpayer could elect to proceed by way of Informal Procedure where the aggregate of all amounts in issue in an income tax appeal is equal to or less than $25,000 (or where a loss does not exceed $50,000). ï Also, under a new monetary limit for GST/HST appeals, an appeal involving an amount in dispute in excess of $50,000 would be required to proceed by way of the General Procedure. ï Allow the Tax Court of Canada to dispose of issues raised in an appeal of an assessment separately, so that some issues can be resolved independently from others and to allow the Minister of National Revenue to give effect to the decision of the Court in respect of those discrete issues. ï Permit the Tax Court of Canada to hear a question affecting a group of two or more taxpayers that arises out of substantially similar transactions, and provide that the resulting judicial determination is binding across the group. The problem may well need resolution outside the procedure of the Court first. Tax issues very seldom rely on the exact same facts; the existence or absence of one tiny detail can change the character of a case immensely. Attempting to deal with similar cases together and creating binding judgments on all parties involved is not only contrary to equitable justice, but would only result in more appeals. NEXT TIME: IMPROVING TAX PROVISIONS THAT LAND IN COURT

In addition to prudent fiscal policy and a sound domestic financial system, the Government and the Bank of Canada attribute Canada's success in weathering the storm of the recent global recession to Canada's flexible inflation-targeting framework. The Inflation Control Target was initially introduced in 1991. Since then, Consumer Price Index (CPI) inflation has been held to a stable and predictable level of close to 2 per cent. What's more, real output has expanded at an average rate of close to 3 per cent per annum. The labour market has also been strong, exemplified by the sub 6% unemployment rate prior to the 2008-2009 global financial crisis. Canada has been one of the strongest performing advanced economies throughout the crisis. In fact, Canada is the only G7 country to have recovered all of the output and the jobs lost during the recession, and more. As a result, the Government the Bank of Canada agreed to renew the inflation target on the following basis (from the Bank of Canada): ï The target will continue to be defined in terms of the 12-month rate of change in the total CPI. ï The inflation target will continue to be the 2 per cent mid-point of the 1 to 3 per cent inflation-control range. The agreement will run for another five-year period, ending 31 December 2016.   Additional Educational Resource: Financial Recovery In a Fragile World book