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. 

With the recent devastation of Hurrican Irene, many Canadians have been left to pick up the pieces. It is also difficult to forget the wildfires, tornados, and flooding that have impacted thousands the past summer.Canadians who have suffered hardship should be aware that under the taxpayer relief provisions CRA can extend leniency, as it recently reminded taxpayers in a news release. Specifically, when taxpayers are unable to file a return or make a payment on time due to circumstances beyond their control, such as a natural disaster, interest and/or penalties can be waived or cancelled. The court system can also help with fairness issues around the issue of filing deadlines. For example, following a 2010 case (Lacroix v The Queen, 2010 TCC 160), it was stated, to the corporate taxpayer's financial relief, that "unclaimed tax credits can be applied beyond the limitation period to reduce the net tax assessedî. For those who have already filed their returns in a timely manner, but did not take advantage of provisions available, claims may still be submitted. Additional Educational Resources: EverGreen, Make Sure It's Deductible - Fourth Edition

At a time when investment returns are low and markets volatile, CRA has been busy handing out stiff penalties for late filing, and invoking other weapons for collection, albeit not always successfully. Tax and financial planners can help preserve well-laid plans for savings, by reminding procrastinators to file sooner rather than later, in order to preserve capital.   There can be seriousóand expensive--consequences for failing to file your taxes on time. Late filers can face not only fines, but must pay the full amount of taxes owing, interest, and any civil penalties that may be assessed by the CRA. A Mission, BC drywaller, for example, was recently fined $5,000 for not filing returns. He was given one year to pay the fine, which resulted from not filing returns on personal income tax and GST from 2006-2008. But in another case, CRA lost, having used the GAAR (General Anti-Avoidance Rule) to deemed that a non-resident, Lehigh Cement Ltd., was wrongly withholding tax payable on interest income. Lehigh, however, won this round. While the company had used the rules in a novel way, the court concurred none-the-less they used them correctly, stating that by "the fact that an exemption may be claimed in an unforeseen or novel manner, as may have occurred in this case, does not necessarily mean that the claim is a misuse of the exemptionî. Taxpayers feeling guilty for not filing returns or reporting all of their income, should also be encouraged to voluntarily correct their tax affairs. A valid disclosure must be made before any compliance action by CRA against you. While penalties can be avoided, be aware taxes owing, plus interest, must be paid. (However, interest may be waived in hardship cases (see KBR article 'Tap Into Fairness Relief to Cancel Penalities').Additional Educational Resources: Essential Tax Facts, Tax Planning for the Corporate Owner Manager  

<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" /> The Finance Department released legislative changes that describe the proposed Income Tax Amendments announced on June 6, 2011. Of interest and significant complexity are the provisions around the following changes: Corporations: Limit on Deferral of Tax (ITA Section 34.2 and 34.3). These new sections were necessary to remove reference to the 10-year reserving period on stub period income, which has expired and to limit the deferral of tax on corporate income earned through partnership. The notes describe two new sections related to "adjusted stub periodî accrual rules and related "qualifying transitional incomeî when a partnership has a fiscal period different from that of the corporation. The income inclusion rules will not, however, apply to a corporation which is bankrupt. Special rules for cases where a foreign affiliate is a member of a partnership, or a multi-tier partnership structure are also outlined. Tax Deferred TransactionsóFlow Through Shares. Previously, tax exempt capital gains resulted with the donation of flow through shares. Now, a class of flow through shares, defined as any shares of the capital stock of a company, or certain interests in a partnership, if any other shares of the class are a flow through share, acquired after March 22, 2011. The taxpayer will be required to pay tax at normal capital gains rates on capital gains realized on these dispositions if there is a positive balance in the pool defined as the "exemption thresholdî. The gains will reduce the balance in that threshold; once it has been reduced to nil, any gain from the donation of publicly-listed shares to a qualified donee will be exempt from tax. The effect is that the exemption from tax will only occur to the extent that the "cumulative gains limitî in respect of the dispositions of share of that class of shares acquired under a flow through share agreement exceed the original cost of the flow through shares.   Additional Education Resources: Introduction to Corporate Tax, Advanced Tax Preparation and Research  

FINANCIAL RECOVERY IN FRAGILE TIMES At The Distinguished Advisor Conference November 13-16 in Palm Springs Early Registration Opportunity Ends September 30 Winnipeg, Manitoba. As both natural and economic storms lash North America, a distinguished audience of leaders from the tax and financial services will gather November 13 to 16 at the Distinguished Advisor Conference to discuss family wealth management from a favourite retirement destination for Canadian boomers. "In times of great change, advisors have the opportunity to do great work.î says Evelyn Jacks, President, The Knowledge Bureau, founder and host of this event. "In fact, the times are unprecedented, which is why the experience, expertise and thoughtful collaboration by industry leaders is required to move forward. That's what this Distinguished Advisor Conference is about.î The inter-advisory forum will explore new ways to navigate families towards their best possible financial outcomes, in retirement and through inter-generational planning within changing landscapes in international tax law, financial and wealth management techniques: Eighteen influential speakers will take the stage to help advisors plan strategically to embrace the advantages of these significant times, build their teams with new competences and grow their practices with preparedness. There is still time to enrol at Early registration fee discounts until September 30. The event takes place at the Miramonte Resort and Spa in Palm Springs; detailed information is available by phone at 1-866-953-4769 or online at www.knowledgebureau.com/dac. Contact Knowledge Bureau for group rates for registrations and flights. Over 150 advisors are expected to tackle issues that require management in volatile times: from the global economy to consumerism, debt, portfolio construction, domestic and international tax and retirement planning and persistent challenges to a family's required investment returns.  

  Evelyn Jacks, Your Money, Your Life   To read the latest blog entry by Evelyn Jacks: Historic August: How well did you manage behavior?  

According to Stats Canada Report, Principal Field Crops, prairie farmers anticipate a record harvest of canola this year, as well as higher volumes of barley, oats and wheat compared with 2010. However, farmers in Ontario and Quebec anticipate a smaller crop of corn for grain in 2011. Year end tax planning can be important this year, to take these issues into account, and minimize the anticipated tax before the December 31 instalment payment for the year is due. For example, RRSP planning, family income splitting and a review of available loss carry forward options should be taken into account. Mandatory and optional inventory provisions may also play a role in averaging income levels. When it comes to the December instalment payment, most taxpayers know that when they fall into an instalment profile, they will receive a regular billing notice from CRA reminding them about this, based on their taxes payable of the immediately prior two years. Trouble is, if income has fallen since then, instalments may no longer be necessary. Yet many people keep paying the request for instalments sent by the CRA, instead of using or investing that extra money for themselves. Good news: taxpayers can request an adjustment to change instalment remittances by asking their tax or financial advisor to write a letter to CRA to request instalments be calculated under one of two other options: Current-Year Option. Under this option, the taxpayer's income tax liability (plus amounts that will be owing to the Canada Pension Plan - CPP) for the current taxation year is estimated, and then one-quarter of the estimated amount over $3000 is due on each of the four due dates: March 15, June 15, September 15 and December 15. Farmers, as mentioned pay, on December 31 based on 2/3 of prior year net taxes owing, plus the CPP for the year, or 2/3 of the anticipate current year amounts. Prior-Year Option. Under this option, you will estimate your instalments based on your prior year taxes and CPP premiums owing. Tax software computes this easily; otherwise see your tax professional for help. Taking control of the taxes paid on earnings is the first step in controlling more of your cash flow so that you can actually have the money to pay your bills and make investments, too. Additional Educational Resource: Tax Preparation for Proprietorships