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. 

CRA administers the Scientific Research and Experimental Development (SR&ED) Tax Incentive Program for participating provinces. This program encourages innovation in business by means of refunds and tax credits for research and development work conducted in Canada. A summary of provincial SR&ED tax credits has recently been posted on the CRA website. Businesses of all sizes may qualify for these incentives. Eligible projects may include experimental development to create new products or technologies or improve existing ones, and basic or applied research. Work that supports these endeavors qualifies as well. Free public information sessions are being conducted across Canada. You can consult CRA for registration details and general information on the SR&ED Tax Incentive Program. ADDITIONAL EDUCATIONAL RESOURCES:EverGreen Explanatory Notes

Only 5% of the new jobs created since mid 2009 went to young workers, according to The Vanier Institute of the Family. Its 12th report on the financial health of the Canadian family, The Current State of Canadian Family Finances 2010 Report warns that the group most keenly affected by under-employment in Canada is youth in the 15-24 age range and as a result "this will force more students to increase their already high debt loads and put more pressure on families for financial support.î How can financial advisors help at tax time? Financial professionals can provide education to young people on how to save money on their taxes with an RRSP and then tap into the savings tax free under the Lifelong Learning Plan. Parents can be educated on tax preferred savings and investment vehicles such as RESPs and TFSAs to begin saving for younger children. Preparing taxes as a family, rather than individual tax filing, can also help. This will ensure that transferrable provisions like the tuition, education and textbook credit are maximized. Because thirty seems to be the new twenty, advisors need to be prepared to help families deal with longer periods of support for young adults in the post-recession world. This must be factored into the tax and financial planning exercise. ADDITIONAL EDUCATIONAL RESOURCES: EverGreen Explanatory Notes Introduction to Personal Tax Preparation Services

CRA has just released an updated version of RC4466 Tax-Free Savings Account (TFSA), Guide for Individuals.  It includes an important section on rules established on October 17, 2009 to prevent abuse of TFSAs, as well as proposed changes regarding the successor holder of the TFSA. This designation is available in provinces that recognize beneficiary designations for TFSAs. Currently, all provinces but Quebec allow this. There was some confusion about the re-contribution rules when TFSAs were first introduced. Many taxpayers were assessed penalties for over-contributions last year because they understood that amounts withdrawn can be put back into their TFSA accounts. This is true, but not until the next calendar tax year. The TFSA Guide explains it this way: "You cannot contribute more than your TFSA contribution room in a given year, even if you make withdrawals from the account during the year. Withdrawals from the account in the year will be added to your contribution room in the following year. If you over-contribute in the year, you will be subject to a tax equal to 1% of the highest excess TFSA amount in the month, for each month you are in an excess contribution position.î As contribution limits grow, TFSA accounts will become increasingly important savings and investment vehicles for all eligible Canadians. Make sure that you know the rules so your clients will benefit from your expertise! ADDITIONAL EDUCATIONAL RESOURCES: Advanced Tax Preparation and Research, EverGreen Explanatory Notes, Knowledge Bureau's Annual Line-by-Line Tax Update Workbook

A seamless way to produce T4 slips online and electronically file the T4 summary is now available to small employers who have 6 or fewer T4 slips to file for 2010. If this speaks to you, check out T4 Web Forms on the CRA website. It is a quick and accurate way to complete your T4 filing for 2010. Those who qualify, based on last year's T4 filing pattern, should have received a Web access code in the mail by now. If you don't have the code, it can be retrieved online or by calling the CRA e-services Helpdesk for business at 1-877-322-7849. If you think you should qualify (i.e. you are a new employer with 6 or fewer employees), you should contact this number to become registered. Have your Business Number ready. Once logged in to T4 Web Forms, the process to generate T4s and the T4 summary is easy to follow. Enter the total income and deduction data for each employee and the documents will be generated. When you enter the 2010 remittance total (found on the January, 2011 Statement of Account after Amount Paid for 2010), the T4 summary will automatically calculate amounts owing or an overpayment. Once you have printed the T4s and the T4 summary, click to submit the record and you have completed the filing requirements for 2010! ADDITIONAL EDUCATIONAL RESOURCES: Tax Preparation for Proprietorships; Advanced Payroll for Professional Bookkeepers

On February 17, 2011, the Vanier Institute of the Family released its 12th report on Canadian family finances. Entitled The Current State of Canadian Family Finances 2010 Report, this document declares that "for far too many, there is too little income, too much spending, too little saving and too much debt.î Leading tax and financial advisors will want to discuss this issue during tax season, in order to find proactive ways to increase after-tax income which can contribute to debt reduction. According to the report, average family debt has surpassed $100,000 and the debt-to-income ration is 150%. This means that for every $100 received in after-tax income, a Canadian household, on average, owes $150.00. In comparison, average family debt in 1990 was $58,600 and the debt-to-income ratio was 93%. When you factor in inflation, the Report calculates that this is a 78% increase in household debt since 1990. And despite new investment vehicles like the TFSA, savings rates have declined during the past two decades. In 1990, the average Canadian family was able to save $8000 annually, a savings rate of 13%. This has dropped to $2500 in 2010, a savings rate of 4.2%. Advisors should be discussing how this trend can be reversed. A possible culprit is demographicsóboomers are using the savings they created in the last decade to fund retirement or support children and parents. However, for others, savings room may possibly be eaten up for a number of other reasons, for example, overpaid taxes and too much consumer debt. The former issue can be addressed with proper tax planning; the later with a disciplined plan to replace bad debt (consumer goods) with good debt (asset-backed).ADDITIONAL EDUCATIONAL RESOURCES: Tax-Efficient Retirement Income Planning, Introduction to Personal Tax Preparation.

If you are looking for relevant financial reading, make sure that you make time for Canadians and Their Money: Building a brighter financial future. This is the report of the Task Force on Financial Literacy, which was commissioned by Canadian Finance Minister James Flaherty in June, 2009. The Minister appointed 13 members to the Task Force from leaders in business, education, academia and community development, including Evelyn Jacks, President of the Knowledge Bureau. Consultations with Canadians from coast to coast led to the report; a comprehensive strategy for the improvement of financial literacy in Canada, released to the public by the Finance Minister last week. The report defines financial literacy as "having the knowledge, skills and confidence to make responsible financial decisionsî. It states five priorities as pillars of the strategy: 1. Shared Responsibility 2. Leadership and Collaboration 3. Lifelong Learning 4. Delivery and Promotion 5. Accountability From those priorities stem thirty recommendations for action to enable a sustainable National Strategy for financial literacy. To begin the Task Force recommended that a national leader be appointed by the Finance Minister to work with an advisory council in carrying out the recommendations of the Task Force. A single source national website for financial literacy was also recommended as a portal to accumulate unbiased information for Canadians to access accurate, trustworthy information. This includes educational resources, self-assessment tools and financial calculators. The financial services were particularly targeted for improvement in their communications with Canadians. Although there is a lot of information out there for consumers, the report maintains that "Ö much of this material is complex and is not presented in simple, accessible language. In our judgment, financial services providers have a responsibility to ensure that their informational materials are developed, written and designed to be readily understood. Transparency is key. It is vital that institutions have well-trained front-line and advisory staff that can provide accurate information and helpful guidance to customers.î Financial education for youth is also emphasized in the recommendations. The Financial Planning Standards Council, one of the presenters to the Task Force, is quoted: "Young people must develop a positive relationship with money and learn that their relationship with money is a life skill and as important as their relationship with language, reading or arithmetic. They need to learn that money is actually a tool to help them achieve what they want in life.î The Task Force recommends that financial literacy be deemed an "essential skillî by the government. It should be incorporated into the student loans process and programs for aboriginal youth. According to input from Credit Counselling Services of Atlantic Canada: "Financial education needs to be a mandatory part of the school curriculum. These programs should be consistent in content and progression across Canada. This is not for most people a skill they're born with. It's a learned skill, and the earlier you start that education, the sooner you begin building the foundationÖ.î The Task Force recommends that the government establish a new award for financial literacy education within the Prime Minister's Awards for Teaching Excellence. The need for lifelong learning is underscored in the report as well. According to the report, Canadians need to have financial education opportunities at all stages of life, revolving around times when financial decisions must be made. Businesses, institutions and governments must identify and respond to "teachable momentsî as they occur. Further, the public has the right to sound, unbiased assistance with money matters. As public consultation participant Doreen E. Malone CA writes, "Probably one of the most essential pieces of financial knowledge Canadians should have is knowing when to seek outside help in making financial decisions and how to evaluate the quality of that advice.î Amongst some of the other recommendations: Canada must participate in international projects such as the OECD Program for International Student Assessment in order to learn, as the Task Force did, from a deeper pool of financial literacy experience and outcomes. We must support volunteer organizations and groups that assist immigrants. First Nations facilitators should be trained to bring financial literacy to their communities. Government and employers must work harder to promote, explain and facilitate participation by Canadians in savings and income programs for which they are eligible. The report concludes by outlining the need for measurement, evaluation and accountability as the recommendations of the Task Force are implemented. Government, employers and financial institutions and professionals must take financial literacy seriously and must be able to demonstrate a firm commitment to Canadians. Read the report ñ read every page of it. What can we, as industry professionals, do to incorporate financial literacy into our practices? The Task Force has thrown down the gauntlet ñ let's run with it. ADDITIONAL EDUCATIONAL RESOURCE: Master Financial Advisor Designation