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. 

There are many items of importance to Canadians included in the recent federal budget.  Educators, students, homeowners and supporters of the arts will be interested in these measures: Education and Training: The Government intends to enhance and expand eligibility for Canada Student Loans and Grants for part-time and full-time post-secondary students. Some jurisdictions may make the federal enhancements available for the 2011ñ12 academic year; it is expected that these changes will be fully implemented by all regionsin the 2012ñ13 academic year. Starting in 2012ñ13, the Government will also forgive a portion of the federal component of Canada Student Loans for new family physicians, nurses and nurse practitioners who agree to work in under-served rural and remote communities An investment $9 million over two years to expand adult basic education programming in the territories is planned in orderto increase employment opportunities for Northerners. Providing up to $10 million a year in tax relief and Registered Education Savings Plan assistance to the increasing number of Canadian post-secondary students who study abroad will begin in 2011. The 13-week minimum duration requirement will be reduced from thirteen to three consecutive weeks with respect to the Education and Textbook Tax Credits. The budget provides $10 million over two years to develop and implement an international education strategy that will reinforce Canada as a country of choice to study and conduct world-class research. The Government encourages skills certification by making all occupational, trade and professional examination fees eligible for tax relief. Many foreign-trained workers have difficulty paying for the tuition and other training costs associated with the foreign credential recognition process. Human Resources and Skills Development Canada and Citizenship and Immigration Canada will test ways to help foreign trained workers to cover these costs. Environmental Initiatives: The budget pledges $400 million in 2011ñ12 for the ecoENERGY Retrofit ñ Homes program to help homeowners make their homes more energy efficient. Budget 2011 invests $22 million over two years to help First Nations ensure that the fuel tanks that power their essential community services, such as water and waste water treatment systems, schools and community buildings, meet new environmental safety standards. The budget has set aside $58 million over two years to support a suite of programs aimed at helping Canadians adapt to a changing climate. For more information, consult EverGreen Explanatory Notes as new legislation is introduced! ADDITIONAL EDUCATIONAL RESOURCES: EverGreen Explanatory Notes

CRA reports that of the 24.5 million returns they have received as of May 31, 15.9 million were filed using EFILE, NETFILE, or TELEFILE, compared to 15.2 million last year. Paper filing continues to decrease in popularityójust over 8.5 million returns were filed on paper so far, compared to 9.1 million at the same time last year. Convenience is a big factor, and so is speed of deposit, especially during a postal strike. This is the subject of Evelyn Jacks' blog this week. Here are the figures: 2011 filing season statistics as of May 31, 2011   2010 2011 Change Returns received 24,365,078 24,512,273 0.60% Paper 9,132,581 8,569,627 -6.16% NETFILE 4,741,021 5,025,772 6.01% TELEFILE 387,694 353,482 -8.82% EFILE 10,103,782 10,563,392 4.55% A complete list of electronic options for individuals, businesses and tax preparers may be found by checking out Canada Revenue Agency E-Services. ADDITIONAL EDUCATIONAL RESOURCES: Master Your Taxes

In difficult times, activity concerning bankruptcies, consumer proposals and debt restructuring increases. If interest is, or would be, deductible to the debtor, then a debt is considered to be commercial in nature. When commercial debt is forgiven, the forgiven amount is given special tax treatment. CRA has recently updated two of its tax forms that deal with commercial debt. The debt forgiveness rules are summarized by CRA on form T2154 Application of Designated Forgiven Debt Under Section 80. In essence, when a commercial debt is settled for less than its principal amount, the forgiven amount must be applied to reduce any losses that have been carried forward. Any amount remaining may be applied to reduce other amounts such as capital cost, cumulative eligible capital and adjusted cost bases of capital properties. If not designated, any unapplied forgiven amount will be included in income. The forms that have just been updated are: 1. T2153 Designations with Respect to Forgiven Debt Under Paragraph 80(2)1 When you as the debtor settle more than one commercial obligation at the same time, use this form to designate the order the obligations were settled under the debt forgiveness rules. If the order is not designated then CRA will make the choice for you. 2. T2155 Alternative Treatment of Capital Gains Arising Under Section 80.03 on Settlement of Debt When you as the debtor surrender certain capital properties you will be considered to have a capital gain from the disposition at that time. You can treat the capital gain as a forgiven amount for the purposes of the debt forgiveness rules. You have to designate the amount using this form, and file it with your income tax return for the tax year when the disposition occurred. There are maximum amounts of designated forgiven debt allowed. Another form, T2156 Transfer Agreement for Transferer of Forgiven Debt Under Section 80.04, allows the debtor to transfer unapplied forgiven amounts to an eligible transferee, as agreed by both parties. An eligible transferee is a corporation or partnership to which the debtor is related. These debt forgiveness rules from Section 80 of the Income Tax Act are explained in greater detail in EverGreen Explanatory Notes. The rules are complex, so please consult a tax professional for advice and guidance. Planning and preparation will improve any situation when there are difficult decisions to be made. ADDITIONAL EDUCATIONAL RESOURCES:  Debt and Cash Flow Management - pre-order now!  

Revised payroll deduction tables are now available from CRA for use by HR departments, bookkeepers and payroll clerks, who will want to ensure, at the same time that they distribute staff memos, that they highlight any changes to the rules and encourage employees to make adjustments to their TD1 Tax Credit returns. The federal payroll deductions have not changed since January, 2011, but the provinces of Manitoba, Nova Scotia and Saskatchewan have made adjustments effective July 1, 2011. Make sure that you use the updated TD1 forms for new hires in these provinces after July 1st. Even though the changes have not been legislated into law, CRA recommends that the new payroll formulas be used to calculate withholding tax beginning with the first payroll in July. The new provincial amounts and formulas, once they become law, will be retroactive to July 1, 2011. Form T1213 Request for Reduction in Tax Deductions at Source may be used for any deductions or non-refundable tax credits that are not part of the TD1.   ADDITIONAL EDUCATIONAL RESOURCES:  Advanced Payroll for Professional Bookkeepers   

The Bank of Canada summarized exchange rates for the first week of June in its most recent Weekly Financial Statistics. The Canadian dollar effective exchange rate index (CERI) continues to hold at approximately 1.21. The CERI has replaced the C-6 index as the Bank of Canada's new measure of the value of the Canadian dollar compared to the currencies of its most important trading partners. June 8th saw the Canadian dollar valued at $1.0207 against the U.S. greenback, $1.4266 as compared to the Euro, $1.6020 for 1 British pound, $1.1687 Swiss francs and 0.012240 as measured in Japanese Yen. ADDITIONAL EDUCATIONAL RESOURCES: Elements of Real Wealth Management

Interest rates for the third calendar quarter have been announced by Canada Revenue Agency and there are no changes from the previous quarter. These prescribed annual interest rates will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from July1, 2011 to September 30,2011. The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 5%. The interest rate to be paid on corporate taxpayers overpayments will be 1%. The interest rate to be paid on non corporate taxpayers overpayments will be 3%. The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%. The interest rates on overdue and overpaid remittances are as follows: Tax, duty, or other charges Overdue remittances Overpaid remittances Corporate taxpayers Non corporate taxpayers Goods and Services Tax (GST) 5% 1% 3% Harmonized Sales Tax (HST) 5% 1% 3% Air Travellers Security Charge 5% 1% 3% Excise Tax (non GST/HST 5% 1% 3% Excise Duty (except brewer licensees) 5% 1% 3% Excise Duty (brewer licensees) 3% N/A N/A Softwood Lumber Products Export Charge 5% 1% 3% Old Age Security and Canada Pension Plan rates for the third quarter are not yet available ñ stay tuned! ADDITIONAL EDUCATIONAL RESOURES: Essential Tax Facts: 2012 Edition