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. 

Bozzer v Canada (2011) FCA 186 Since 1991, taxpayers who feel they were unjustly charged interest or penalties on income tax owing could apply to the CRA under the ëfairness provisions' for potential relief. These provisions offer the CRA a wide discretion to cancel, waive or alter penalties or interest, but not the tax itself. In order for the provisions to apply, the contentious interest and/or penalties must have arisen from circumstances which were beyond the taxpayer's control including events such as, natural disasters, civil disturbances, a serious illness or accident, or serious emotional or mental distress such as a death in the family. Subsection 220(3.1) of the Income Tax Act gives the CRA a wide discretion to waive or cancel any portion of interest or penalties owing under the Act, statutorily limited to ten years; the question in the Bozzer case was how to delineate the parameters of that ten year limitation. The Federal Court of Appeal gave an answer that was very favourable to all taxpayers. The CRA denied Bozzer's request for relief multiple times before he arrived at the Court of Appeal, saying the ten years expired for his file on December 31, 1999 for the 1989 taxation year and December 31, 2000 for the 1990 taxation year. Mr. Bozzer argued it was irrelevant that his debt arose in 1989 and 1990 because he was merely requesting relief for the ten years prior to his application, which was made in December 2005. Therefore, the ten year limit covered the interest that accrued from January 1, 1995 to December 31, 2004, and was unrelated to the years the debt arose. The Federal Court of Appeal agreed with these submissions and, at paragraph 42 Stratas J.A revealed the difficulty in interpreting this section of the Act but proclaimed: "The words chosen by Parliament are ambiguous. In my view, in this particular situation, this ambiguity should be resolved in favour of the taxpayer.î   ADDITIONAL EDUCATIONAL RESOURCES: Distinguished AdvisorWorkshop - November Year End Planning and Introduction to Personal Tax Services  

By Evelyn Jacks Where do you invest your money? That's likely the most salient question of the times. There are so many ways to go wrong. A recent article in The Economist, summarized the historical fury of bear markets that have substantially wiped out wealth: In 1946 when bond yields were at their current 2.5% level, 75% of their value was lost in the following 25 years in Britain. When investors hurried into gold in its last peak in 1980, the price fell by 2/3 in the next 20 years that followed. By the year 2000, when the world was highly exuberant about the internet, the dividend yield on American equities was just one per cent; and the annual real equity return over the next 10 years just under that, .08%. In 2011, despite strong growth in India and China, emerging equity markets fell 23% in the third quarter; resulting in those shares trading on a discounted valuation compared to developed-market counterparts. In Canada, we are comforted by strong banks and a strong, stable real estate market. Today residential housing development represents about 20% of the domestic economy, according to the Canada Mortgage and Housing Corporation, and rising real estate values continue to drive consumer confidence. What's noteworthy, however is that residential mortgages are the biggest single asset on Canadian bank balance sheets, according to an October 15 article by Postmedia News. What happens if the real estate bubble bursts? What could make it burst? Demographics, for one thing. Will baby boomers downsize out of their empty nests? Will their 20 and 30-something children stop buying homes with all the uncertainty? Will they default on mortgages if we enter a deeper recessionary phase? How will that affect the balance sheets of Canadian banks? My co-author Robert Ironside says this: "The issue with respect to the banks, should we have a major real estate correction, is of great concern. The banks are shielded somewhat by the existence of mortgage insurance on their high ratio mortgages but their income and asset growth would be significantly affected.î Wealth preservation seems to be the name of the game today, but an additional issue is this: even if we are great savers, what will our current dollars buy in the future?If we hold on to the wrong things; we face the winds of financial erosion. Those winds include the potential for recession, deflation, inflation and taxes. Continuing to make new money is a strong defense. This is easier if you have a stable income from employment or self-employment; much more difficult if you are living on a fixed income in retirement, although a savvy eye to investing in income-producing assets is important; so is an indexed pension plan. Managing tax and debt loads is something we can directly control, and both add points to your rate of return as well. In other words, financial recovery begins at the micro level; with financially stable households. It's Your Money. Your Life. It makes sense to get your financial affairs in order in this climate. Managing debt loads, especially mortgage debt, is important. So is tax efficiency.But in addition, having a great relationship with a trusted and learned team of tax, financial and legal advisors is paramount. Evelyn Jacks is President of Knowledge Bureau and has recently been named one of Canada's Top 25 Women of Influence. She is writing her 48th book, and will discuss the financial recovery with an inter-advisory audience at the Distinguished Advisor Workshops November 2 to 10 and at the Distinguished Advisor Conference November 13-16 in Palm Springs.  

The Employer's Guide to filing the T4 slip has been released, together with the slip itself and the changes to be aware of are the following: CPP Reform - Employees under 65 who are receiving a CPP or QPP will have to make CPP contributions that will increase their CPP retirement benefit. - Employees who are between 65 and 69 (inclusive) and are receiving a CPP/QPP will be able to elect to stop contributing to the CPP. Reporting Change for Pensionable/Insurable Earnings - These must now be completed on the T4 slip at all times Volunteer Firefighters - Exempt payments to volunteer firefighters (up to $1000) will now have to be reported using code 87in the ëother information' area of the T4. Web Forms As of January 2012, you can electronically file an original or amended information return of up to 50 T4 slips in a single submission using the CRA's Web Forms application. This service will allow you to: - Create an electronic T4 information return;- Validate data in real time, with prompts to correct errors before filing;- Calculate the totals for the Summary;- Print and save T4 slips; and- Securely submit encrypted T4 information returns over the Internet. For more information: T4 Web forms T4 Statement of Remuneration Paid (slip) RC4120 Employers' Guide - Filing the T4 Slip and Summary ADDITIONAL EDUCATIONAL RESOURCES: INTRODUCTION TO PERSONAL TAX PREPARATION SERVICES  

Consultations and deliberations continue on the proposed new Pooled Pension Retirement Plans (PRPPs) which differ from existing RPPs in that individuals who may not currently participate in a pension plan, such as the self-employed, can benefit from participating in a large-scale, low-cost pension plan. You may participate by email with your suggestions on PRPP's: prpp-consultations-rpac@fin.gc.ca The Honourable Ted Menzies, who is presiding over the consultations, spoke recently at the Investment Funds Institute of Canada's Annual Industry Conference, explaining that this new opportunity is especially important for millions of small business owners and their employees, who will now have access to a private pension plan for the very firsttime. They will also benefit from the lower investment management costs. The high level details of the plans are as follows: - PRPPs will be available to employers, employees, and the self-employed. There will be two classes of members: Employed Members and Individual Members. Investments will be common across all members, but there will becertain administrative and regulatory differences between the two. For some Canadians, this will be the first opportunity they have had to contribute to and benefit from a retirement plan. - As a result of ëpooling', administration costs will be lower than regular pension plans. Indeed, the Minister stated: "PRPPs will be efficiently managed, privately administered pension arrangements that will provide greater choice to employers and individuals, thereby promoting pension coverage and retirement saving.î- PRPP's will allow for the portability of benefits, facilitating easy transfers between plans- PRPP's will ensure that funds are invested in the best interest of members. - Similar systems have been recognized internationally by experts such as the Organization for Economic Co-operation and Development (OECD) as a successful model in reducing poverty among seniors and proving consistent high levels of income replacement. - The plans are intended to be harmonized across jurisdictions as much as possible, which will also facilitate lower administrative costs. However, inevitably in a federal system, there will be some variances across jurisdictions. For example, one aspect of the plan will allow each jurisdiction to make a determination as to whether it wants to impose mandatory employer participation. For more info: http://www.fin.gc.ca/act/prpp-prac/index-eng.asp ADDITIONAL EDUCATIONAL RESOURCES: Evergreen Explanatory Notes, An Excellent Way For Graduates Of The Knowledge Bureau Certificate Courses To Stay Up-To-Date Without Having To Travel.  

A flurry of good economic news came out of Ottawa last week, relating to our deficit fighting progress, manufacturing sales increases and low unemployment numbers for August. Even the real estate sector has done well. The Honourable Jim Flaherty, Minister of Finance, released the Annual Financial Report of the Government of Canadafor 2010ñ11. Revealing a 40-per-cent reduction in the deficit from 2009ñ10 and $2.8 billion lower total than forecast in June 2011. These numbers are attributable to higher revenues and lower program expenses than forecast. In other economic news reported by Statistics Canada in October, manufacturing sales rose for second consecutive month in August. Transportation, food, and energy, especially petroleum and coal, saw the largest increases overall; Quebec, Newfoundland and Labrador, and Ontario led the provincial increases. Canada's trade deficit with the world went from$539 million in July to $622 million in August as a result of merchandise imports growing 0.7% and exports increasing by 0.5% in August. Employment increased by 61,000 in September, pushing the unemployment rate down 0.2 percent to 7.1%, the lowest rate since December 2008. Educational, professional, scientific and technical services all saw increases in employment, as well as accommodation and food services, natural resources, and public administration. Declines occurred in finance, insurance, real estate and leasing, manufacturing, and information, culture and recreation though, partially offsetting the net increase. Canada's banks have recently been recognized as the strongest in the world (per Bloomberg); but that's not all, the national real estate market is also, for the most part, stable and secure. (See Financial Stability a Must Today) In Canada, at least, the federal Government's stimulus measures subsequent to the 2008 economic downturn have thus far proven their worth. Exemplifying this is the fact that the largest assets on bank balance sheets in Canada are residential mortgages; banks were able to regain confidence in the markets and find incentive for further mortgage lending when certain risks were transferred to the Government. The challenge now, will be to ensure that high residential debt loads are managed to avoid a burst in the current real estate bubble. ADDITIONAL EDUCATIONAL RESOURCES: Join us for peer-to-peer think tanks and year end planning updates at the Distinguished Advisor Workshops (DAW) held in Winnipeg, Ottawa, Toronto, Vancouver and Calgary November 2 to 10, and the Distinguished Advisor Conference in Palm Springs, November 13 to 16.  

The new Employer's guide to filing the T4Slip was released on October 7 and contains two items of note for bookkeepers and business owners getting ready to complete T4 slips for 2011: Upcoming CPP reform The CPP changes for working beneficiaries announced May 25, 2009 will be implemented in January 2012. In preparation for the upcoming changes, starting in January 2012 (for the 2011 taxation year), box 26, "CPP/QPP pensionable earningsî will have to be completed on the T4 slip at all times. Reporting change for insurable earnings Starting in January 2012 (for the 2011 taxation year), box 24, "EI insurable earningsî will have to be completed on the T4 slip at all times. ADDITIONAL EDUCATIONAL RESOURCE: EverGreen Explanatory Notes, Distinguished Advisor Workshops, November 2 to 10.