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. 

Chagnon v The Queen, (2011) TCC 268 A recent case heard at the Tax Court of Canada may have a profound impact for employees and legal advisors alike. The court agreed with obiter comments of Woods J in Fenwick v The Queen, 2008 TCC 243 that paragraph 8(1)b) should extend to legal fees incurred by an employee defending himself in an action by an employer, or a member of a related employer group, seeking to reclaim an amount of salary received by the employee. It is likely that this extension of paragraph 8(1)(b) will lead to an increase in litigation by aggrieved employees who incur legal expenses whilst establishing a right to salary earned. This case arose out of the sale of Vidéotron to Quebec Media Inc and the unsuccessful rival bid by Rogers Communications Inc. The scope and application of paragraph 8(1)(b) of the Income Tax Act was the main issue to be decided. This provision pertains to the deduction available to employees for salary-related legal expenses. The expenses in question related to an unsuccessful defense of an action brought against the appellant two years later by Vidéotron and QMI reclaiming $23,237,627 on the basis that he had inside information relating to Rogers' interest in Vidéotron when the options were granted and that he therefore breached a duty of loyalty to Vidéotron. $383,005 in legal expenses relating to the action was in issue. It was held that paragraph 8(1)(b) extends to legal costs incurred by an employee to retain salary already received when faced with litigation seeking to reclaim that amount. ADDITIONAL EDUCATIONAL RESOURCE: EverGreen Explanatory Notes, Make Sure It's Deductible

On 27 September 2011, Tiff Macklem, Senior Deputy Governor of the Bank of Canada, presented at the National Insurance Conference of Canada in Vancouver. His comments were instructive to investors and their advisors as it relates to risk management in a new economy.Mr. Macklem stated that recessions following financial crises are more severe and are more difficult to overcome than normal recessions. He declared that we find ourselves in a fundamentally new fiscal landscape in which government debt "can no longer be considered a risk-free asset in many advanced countriesî. Specifically, the tendency of using government bonds as the benchmark against which many financial assets are priced is likely to disappear. Slow economic recovery has also had the effect of accelerating the growth of emerging markets at the expense of more advanced economies. In the first half of 2011 the markets saw an increase in risky investments, with investors attempting to yield higher returns. Assets such as high-yield bonds, leveraged loans, emerging-market equity and debt, and commodities are among some of the examples. More recently however, investors have shifted their search for safety and stability, sending prices of risky assets lower. Macklem feels the early efforts to mitigate the sharp decline in the markets in 2008-2009 averted a much larger crisis, but stresses the fact that public confidence in governments is waning as a result of recent indecision as to which route to take. Bottom line for those on fixed incomes in particular: As the markets remain volatile, the importance of guaranteed income sources increases. Seniors relying on Old Age Security will want to ensure they make the most efficient use of their income and take advantage of all subsidies and credits; tax planning in the current economic climate is more important than ever. Now is a good time to discuss retirement income planning options with qualified Master Financial Advisors (MFAs) who specialize in this subject area. ADDITIONAL EDUCATIONAL RESOURCES: Tax Efficient Retirement Income Planning; Master Your Retirement.  

Cash-strapped seniors suffering from prolonged poor investment results will want to ensure that cash flow is supplemented from guaranteed sources like the Old Age Security. If a clawback based on prior year income levels is part of the equation, advisors can help by applying for a reduction in this recovery tax using a newly updated form T1213. Here's how it works: 1. Estimate income from all sources 2. Take deductions including investment carrying charges and interest expenses 3. Take non-refundable tax credits into account including the disability amount and eligible medical expenses and charitable donations, and 4. Provide information about tax deducted at source and paid through instalments If the result warrants a reduction of the OAS recovery tax, the senior will be provided a higher monthly income from this source. ADDITIONAL EDUCATIONAL RESOURCE: Introduction to Personal Tax Preparation Services; Distinguished Advisor Workshops, November 2 to 10.  

Where should your investment advice come from? According to a recent survey by Cisco's Internet Business Solution Group, (March 30, 2011), half of those under age 50 use social networking for their investment advice. That's a staggering number. Yet using the internet to make important financial decisions and then execute them without proper assistance could be a costly solution to your investment questions. It makes no sense to take investment advice from anyone you don't know and trust especially if they don't understand your investment needs and objectives. That's the response to the question "Should I accept investment advice offered over the internet: by The Canadian Securities Administrators, who have published a booklet on the subject, entitled "Investing and the Internetî, (http://www.osc.gov.on.ca/documents/en/Investors/res_investing-internet_en.pdf)   Fraud, in fact, is an increasing problem. Stats Canada reported on a 2009 General Social Survey on Victimization. Seven percent of adult Internet users in Canada, age 18 years and older, reported that they had been a victim of cyber-bullying at some point in their life. Seventy-three percent of those people reported receiving threatening or aggressive emails or instant messages and 8% had their identity assumed by someone sending threatening emails. In addition, the survey showed that amongst those who used the Internet in the 12 months prior to the survey, 4% reported being the victim of bank fraud; that is, reporting incidents where credit or debit cards (or information from them) were used from an Internet source to make purchases or withdraw money without authorization from the cardholder. It's Your Money. Your Life. Why take a chance? When it comes to making financial transactions of any kind over the internet, it's prudent to speak to your banking representative, or in the case of your investment transactions, a registered dealer or licensed investment advisor. Evelyn Jacks is President of Knowledge Bureau, a best-selling author and one of Canada's Top 25 Women of Influence. She blogs most weeks at http://www.evelynjacks.com/

Canadian residents age 65 and older will receipt the Old Age Security pension if they have made application to receive the benefit and their income is under prescribed thresholds. The maximum pension is $537.97 for each month in the fourth quarter in 2011: October, November and December (an increase of $4.27 per month from the previous quarter). The OAS will be "clawed backî on the income tax return when an individual's net income is $110,123. This clawback is known as the OAS Recovery Tax. However, many don't realize that the recovery tax can be reduced by filing a Request to Reduce Old Age Security Recovery Tax at Source (Form T1213OAS, recently revised by CRA). This is possible if there are significant deductions from current year income, such as carrying charges, moving expenses or RRSP amounts, or significant non-refundable tax credits like the disability amount, medical expenses or charitable donations. ADDITIONAL EDUCATIONAL RESOURCES: EverGreen Explanatory Notes and the Tax Efficient Retirement Income Planning Course  

Wealth advisors looking for the ideal client to work with should develop new relationships with the self-employedóa large and vibrant market for financial services. There are 2.7 million Canadians, or 16% of the entire workforce, reporting self-employment as their main job in 2010. The self employed have twice the wealth as other households in Canada and, as a result of their higher motivation to manage that wealth, better financial literacy as well, according to a summation of data released by Statistics Canada from the Survey of Labour and Income Dynamics, the Survey of Household Spending and the Canadian Financial Capability Survey. The median net worth of the self-employed was $520,000 in 2009, 2.7 times the median of $195,000 for paid employees, according to the summation released on September 23, 2011. Yet, the median household income of the self employed amounted to 81% that of paid employees. The self employed may leave funds in their businesses for reinvestment purposes or as a reserve fund, thereby reducing income at the same time as they are increasing net worth. There are other important differences in dealing with the self employed. They tend to work longer and therefore plan to retire later than employees: about 74% of the self-employed reported that they were preparing for retirement, compared to 85% of paid employees. That could point to a greater need for critical illness, disability or life insurance to protect the business and/or family with financial support if the owner-manager becomes ill or dies. ADDITIONAL EDUCATIONAL RESOURCES: Elements of Real Wealth Management, Tax Planning for the Corporate Owner-Manager and Master Your Investment in the Family Business