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. 

Farming proved more profitable in 2010 in most provinces, compared to 2009 figures. According to Statistics Canada, net farm income rose 46.1% in 2010, following a 16.6% drop in 2009. Realized net income (the difference between a farmer's cash receipts and operating expenses, minus depreciation plus income in kind) was up in all but two provinces ñ Alberta and New Brunswick. Revenues for oilseeds such as canola and soybeans increased, while wheat, barley and potato income fell due to lower prices for these crops and fewer of them brought to market. Farm operating expenses fell across the board as fertilizer, feed and pesticide costs dropped enough to more than offset higher labour and fuel expenses. Total net income adjusts realized net income for changes in farmer-owned inventories of crops and livestock. It represents the return to owner's equity, unpaid labour, and management and risk. Total net income rose to $2.7 billion in 2010, up $131 million from 2009. Declining inventories and production losses hampered further growth. Farm cash receipts for the first quarter of 2011 have been released by Statistics Canada and there is more good news for farmers for this year. Farm cash receipts include crop and livestock revenues and program payments. A record high of 12.1 billion was received by Canadian farmers with all provinces except Manitoba and British Columbia increasing revenue and with Quebec, PEI and Ontario showing double digit returns. Farm cash receipts had declined 0.2% in 2010. Prices for grains, dried peas and oilseeds rose due to lower supplies and increased demand for biofuels. Livestock, dairy and egg revenues have also been higher higher so far this year. Self-employed farmers are reminded that the filing deadline for unincorporated businesses is June 15th, 2011 - it's coming right up! ADDITIONAL EDUCATIONAL RESOURCES:  Master Your Investment in the Family Business

The Canadian Union of Postal Workers has given notice that it will begin strike activities on June 3, 2011. Talks are continuing and it is hoped that this will be settled before the strike date. However, Canadians should be prepared for a disruption in mail service if negotiations are unsuccessful. Canada Revenue Agency encourages taxpayers to set up for direct deposit so that payments upon which we all depend will continue to arrive safely and on time. Income tax refunds, federal and provincial GST/HST tax credit payments, Working Income Tax Benefit Advance Payments, the Canada Child Tax Benefit and the Universal Child Care Benefit can be received through direct deposit to your financial institution. Direct Deposit can be set up or changed online through My Account. Form T1 DD1 Direct Deposit Request - Individuals can be completed and mailed to your Tax Centre at any time. CRA does not accept banking information changes by phone, but they certainly can assist in completing the Direct Deposit Request form if you call them at 1-800-959-8281. Corporations may receive corporate income tax refunds and GST/HST refunds with a valid business number. Forms T2-DD Direct Deposit Request Form for Corporations and GST469 Direct Deposit Request should be completed and forwarded to your local tax services office or tax centre. Direct deposit is a safe, efficient way in which to receive payments. Make sure that you notify Canada Revenue Agency about any changes to your bank information or address so that your money will continue to arrive in your bank account. With a postal strike looking more certain each day, take time now to contact CRA with your direct deposit information. ADDITIONAL EDUCATIONAL RESOURCES: Essential Tax Facts 2012 for the 2011 Tax Return Available in November, 2011!

The Honourable Jim Flaherty, Minister of Finance, announced on May 25th  that the Federal budget originally tabled on March 22, 2011 will be delivered in Parliament on June 6th. In his announcement, Minister Flaherty said the new budget will restate all the same commitments from the March 22 budget, including support for seniors and family caregivers, help for small businesses to create new jobs, and assistance for Canadians to make their homes more energy efficient. The Government plans to return to balance by 2014ñ15, one year earlier than previously planned.  According to Mr. Flaherty, as part of the plan to reduce the deficit they will conduct a Strategic and Operating Review, which will be reported on and recorded in Budget 2012, when the review is completed. Watch for our special report following the budget.

There are many changes coming for retirees tapping into CPP, so now is a great time to update your clients and provide some tax efficient retirement income planning. Service Canada has produced a detailed fact sheet, Changes to the Canada Pension Plan, which explains the upcoming modifications, with examples included. Here is a summary of the new CPP rules, as outlined by CRA, and what to expect in the future: 1. Beginning in 2011, the monthly CPP retirement pension amount will increase by a higher percentage if taken after age65 Before the changes, a CPP retirement pension increased by 0.5% for each month after age 65 (and up to age 70) that an individual delayed receiving it. This meant that an individual who started receiving their CPP pension at 70 received 30% more than if they had taken it at65. From 2011 to 2013, the Government of Canada will gradually increase this percentage from 0.5% per month (6% per year) to 0.7% per month (8.4% per year). This means that, by 2013, an individual who starts receiving their CPP pension at the age of 70 will receive 42% more than if they had taken it at 65. The following table shows the monthly increase for each year. Year % (monthly increase) 2011 0.57 2012 0.64 2013 0.70 For a person who starts receiving the retirement pension at age 70, this adjustment represents a maximum increase of 34.2% in for those who begin to receive CPP in 2011, 38.4% in 2012, and 42% in 2013. 2. Beginning in 2012, the monthly CPP retirement pension amount will decrease by a larger percentage if taken before age 65 Before the changes, a CPP retirement pension was reduced by 0.5% for each month before age 65 that an individual began receiving it. This meant that an individual who started receiving their CPP pension at 60 received 30% less than if they had waited to take it at 65. From 2012 to 2016, the Government will gradually change this early pension reduction from 0.5% to 0.6% per month. This means that by 2016, an individual who starts receiving their CPP pension at the age of 60 will receive 36% less than if they had taken it at 65. The following table shows the monthly reduction for each year. Year % (monthly reduction) 2012 0.52 2013 0.54 2014 0.56 2015 0.58 2016 0.60 For a person who applies for and receives their CPP retirement pension at age 60, this represents a maximum reduction of 31.2% if he begins to receive CPP in 2012, 32.4% in 2013, 33.6% in 2014, 34.8% in 2015, and 36% in2016. 3. Beginning in 2012, the number of years of low or zero earnings that are automatically dropped from the calculation of the CPP pension will increase Before the changes, when Service Canada calculated an individual's average earnings over their contributory period (from the earliest of January 1, 1966, or age 18 until the effective date of their retirement pension if effective before the age of 70), 15% of their lowest earnings were automatically dropped. This is called the "general drop-out provision.î Under this provision, if someone took their CPP retirement pension at 65, up to 7 years of their lowest earnings were automatically dropped from the calculation of their average earnings. Starting in 2012, the percentage of low earnings will increase to 16%, allowing up to 7.5 years of the lowest earnings to be dropped from the calculation, which will likely increase the benefit amount. In 2014, the percentage will increase again to 17%, allowing up to 8 years of the lowest earnings to be dropped from the calculation. 4. Contributors will be able to receive their CPP retirement pension without any work interruption Starting in 2012, contributors no longer have to stop working or significantly reduce earnings for two consecutive months to receive the CPP retirement pension before the age of 65. This will make it easier for Canadians to make a gradual transition to retirement, combining CPP and part-time work, for example. 5. Post-Retirement Benefit Starting in 2012, anyone who receives a CPP or QPP retirement pension and works outside the province of Quebec may have to continue making CPP contributions, which will increase their payments through the new Post-Retirement Benefit (PRB). The amount of the new benefit will depend on the level of earnings and contributions individuals make to the CPP after they begin receiving the retirement pension. Before the age of 65, contributions will be mandatory for individuals and their employers. From age 65 up to age 70, contributions will be optional (employers will have to contribute if employees do). Individuals who choose not to contribute to the PRB may later change this decision and start contributing. However, only one change can be made per calendar year. Self-employed individuals will have to pay both the employee and employer portions. Some additional facts about the PRB, from Service Canada: Working CPP retirement pension recipients who wish to opt out of contributing to the Plan after age 65 will be required to inform the Canada Revenue Agency. Contributions made while beneficiaries are receiving their CPP retirement pensions will build up only the PRB. These contributions will not create eligibility or increase the amount of other CPP benefits, nor be subject to a credit split or retirement pension sharing. Each year of work will provide an additional post-retirement benefit that will begin the following year and will be paid for life. The PRB will be added to an individual's CPP retirement pension, even if the maximum pension amount is already being received. The current CPP contribution rate of 9.9% is not expected to increase as a result of these modifications. What may change, however, is the context in which the decision to begin receiving to Canada Pension Plan income is made. There is no doubt that Canadians who are fully retired at age 60 and need additional income for living expenses should apply for CPP, in spite of the reductions to monthly income upon early takeup. Those who plan to keep working but at a slower pace with less income may consider early CPP as well. Consult with your tax advisor to project your marginal tax rate for the year in which you begin to draw your CPP; there's no point in giving half of it back to the tax man! Fully-employed Canadians who are already in a high tax bracket should think twice about early CPP ñ deferral looks better now with these changes. Why not wait until retirement or later and enjoy an increased CPP payment at a lower tax rate? No one has a crystal ball and decisions can only be made with the information available at the time. The Canada Pension Plan is not like private retirement savings or employment pension plans. It is most valuable to the person who contributed to it throughout a working lifetime. Upon death, survivor and child benefits are available but these are subject to many restrictions and maximums, depending upon the circumstances of those left behind. In the case of single Canadians, your CPP pension dies with you. This is why it is important to seek expert advice when it comes time to make decisions about retirement, especially when government tax credits, pension and benefits are involved. Education will put you in the driver's seat for the benefit of you and your family! ADDITIONAL EDUCATIONAL RESOURCES: Master Your Retirement

While there are no changes to the CPP, EI or federal tax rates, income thresholds, or personal amounts on July 1, 2011, there are some provincial changes for Manitoba, New Brunswick, Nova Scotia and Saskatchewan. CRA has just released T4127-Payroll Deductions Formulas for Computer Programs.  This is a draft version of changes effective July 1, 2011. This publication contains a wealth of information about payroll taxes, rates and forms ñ it's worth taking a look!  Note that, in some cases, changes effective as of January 1, 2011 are reflected in prorated amounts as they are just being implemented for the latter half of the year. The upcoming provincial tax changes as noted in the T4127 are included below: The Manitoba budget, tabled on April 12, 2011, announced that effective January 1, 2011, the province will increase the basic personal amount to $8,384 from $8,134. Since $8,134 has been used for employees for the first six months of this year, a basic personal amount of $8,634 will be applied for the remaining six months commencing with the first payroll in July. The Option 2 thresholds will not be prorated (the Option 2 formula applies to employees whose remuneration fluctuates from pay period to pay period and is based upon cumulative averaging). Effective July 1, 2011, the prorated amounts for Option 1 (the general tax formula used for most employees) are as follows: The basic personal amount is revised to $8,634 (formerly $8,134). The spouse or common-law partner amount is revised to $8,634 (formerly $8,134). The New Brunswick budget, tabled on March 22, 2011, announced that effective January 1, 2011, the province will increase the fourth income tax bracket to 14.3% from 12.7%. Since employees in this income tax bracket have been taxed at 12.7% for the first six months of this year, a tax rate of 15.9% will be applied for the remaining six months commencing with the first payroll in July. The Option 2 tax rate will not be prorated. Effective July 1, 2011, the rates and tax brackets for Option 1 are as follows: 9.1% on income less than or equal to $37,150; 12.1% on income greater than $37,150, but less than or equal to $74,300; 12.4% on income greater than $74,300, but less than or equal to $120,796; and 15.9% (formerly 12.7%) on income greater than $120,796. The Nova Scotia budget, tabled on April 5, 2011, announced that effective January 1, 2011, the province will increase the basic personal amount to $8,481 from $8,231. Since $8,231 has been used for employees for the first six months of this year, a basic personal amount of $8,731 will be applied for the remaining six months commencing with the first payroll in July. The Option 2 thresholds will not be prorated. Effective July 1, 2011, the prorated amounts for Option 1 are as follows: The basic personal amount is revised to $8,731 (formerly $8,231). The spouse or common-law partner amount is revised to $7,413 (formerly $6,989). In the Saskatchewan provincial Budget 2011 of April 18, 2011, changes were announced to the provincial personal tax credits.  Effective July 1, 2011: The basic personal amount is revised to $14,535 (formerly $13,535); The spouse or common-law partner amount is revised to $14,535 (formerly $13,535); The child amount is revised to $5,514 (formerly $5,014). The Manitoba, Nova Scotia and Saskatchewan TD1 forms have been revised for July 2011 and will be available soon. General refiling of the 2011 Form TD1 is not necessary, but a new employee, a new pensioner, or an individual who wishes to change his or her provincial claim amounts will have to complete the July 2011 Form TD1. ADDITIONAL EDUCATIONAL RESOURCES: Master Your Taxes

At a time when the first of the baby boomers are looking towards retirement, you can rest assured that small to medium business, and the business community in general, are in good hands. With very little knowledge of what I was stepping into, I had the privilege of participating as a judge in the National competition of Students in Financial Education (SIFE). What I found out was inspiring. On May 10, 2011, university students from across Canada, winners of their regional competitions, converged on the Toronto Convention Centre to determine the National Championship. From homeless youth through seniors, business start-ups to going concerns, and everything in between, Canadian post-secondary students are volunteering and helping Canadians learn, implement and benefit through continuing financial education. Combined, Canadian students expended 273,000 volunteer hours directly impacting financial literacy in their respective communities. On behalf of the entire Knowledge Bureau Community, I applaud the efforts and dedication of these students and the measurable results they have achieved across Canada.  I congratulate the Memorial University of Newfoundland team members as the Canadian Champions and wish them the best of luck in the SIFE World Cup. To find out more regarding ACE and how you and your business can get involved, visit the website and locate one of the 52 universities and colleges in your neighbourhood. Alan Rowell MFA DFA-Tax Services Specialist What is ACE? Advancing Canadian Entrepreneurs or ACE is a national, charitable organization dedicated to teaching and igniting young Canadians to create brighter futures for themselves and their communities. Through a collaborative partnership between higher education and industry, ACE delivers programming that provides university and college students access to real world experience that complements in-class studies. By creating solutions to economic, social and environmental issues through outreach projects and business ventures, students make a meaningful contribution to their communities today, while also discovering their potential to achieve an even greater impact as the leaders of tomorrow. What is SIFE? Students In Free Enterprise or SIFE, encourages students to form teams on their campus and apply business concepts learned in the classroom to develop outreach projects that improve the quality of life and standard of living for people in need. Annual national competitions provide a forum for these teams to present the results of their projects, and to be evaluated by business leaders serving as judges. The national champion team advances to the prestigious SIFE World Cup. SIFE operates in 39 countries, on 1,500 college and university campuses and with direct involvement of over 48,000 students worldwide. ADDITIONAL EDUCATIONAL RESOURCES:  The Smart, Savvy Young Consumer Available in November, 2011!