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. 

Tax preparers who have struggled with lost T1013 Authorization Forms and busy CRA fax lines will be happy to know that, as of February 14, 2011, processing of these forms filed online will begin. Representatives who have registered with CRA for the Represent a Client service may file the T1013 electronically. A New CRA User ID and Password is required. There will be a 4 day delay before access to client information is granted ñ a welcome improvement as a result of electronic filing! Please note that the current service standard for T1013 processing during peak periods is 20 business days, and 5 business days for non-peak periods (mid-July to mid-March).

Canada Revenue Agency allows online access to tax information for individuals, business owners and their representatives. But, as of October 4, 2010, CRA has replaced its epass service with a new, secure log-in system requiring a user ID and password. This change applies to My Account for Individuals, My Business Account and Represent a Client.  Taxpayers who had an epass can transition their account to the new system now. Some services normally accessed will not be immediately available due to this transition. However, CRA indicates that everything will be up and running by February 14, 2011. Taxpayers will need the five security questions and answers that they used to set up with the epass system. Those who don't have their security questions on file or who are seeking to log-in for the first time will have to complete a new registration. My Account for Individuals allows taxpayers to access a wealth of personal data including tax slips for E.I., OAS and CPP, payment information for certain tax benefits, account balances, tax owing and refunds, and installment records. It also makes it possible to manage accounts online. Individuals can use My Account for Individuals to make changes to tax returns, update contact information, authorize or cancel representatives, set up payment plans, arrange for direct deposit and dispute an assessment. My Business Account allows business owners or their representatives to view and manage CRA accounts including GST/HST, payroll and income tax.  This year there are three new features: an instalment payment calculator, electronic transmission of accounting data (for audit purposes), and closure requests for payroll accounts.  Represent a Client permits an individual or a business to be granted online access to the tax information of another individual or business.  Examples of representatives include accounting firms, payroll services, tax preparers, financial planners, lawyers, executors, guardians and those holding a power of attorney.  Representatives will be authorized when the taxpayer who is granting access  logs on to My Account for Individuals or My Business Account and enters the Rep ID, Group ID or Business Number of their chosen representative.  Taxpayers may also grant authorization by completing form T1013 and sending it to their Tax Centre.  Some information is available to individuals without a user ID and password. Quick Access requires the Social Insurance Number, date of birth and information from the last filed tax return. This will allow a taxpayer to view his tax return status, RRSP deduction limit and details of benefit payments. ADDITIONAL EDUCATIONAL RESOURCE: Introduction to Personal Tax Preparation Services

As the fiscal stimulus unwinds, the role of government in sparking growth is going to diminish and the private sector is going to have to pick up the slack in helping our economy grow, even though we face significant competitive risk. This is according to Tiff Macklen, Senior Deputy Governor of the Bank of Canada, who spoke to Productivity Alberta on February 2, 2011 on the topic of the erosion of Canada's competitiveness. Canada is losing the import/export battle with many more products entering the country than we are producing for foreign markets. In fact, China has replaced Canada as the largest exporter to the U.S. Our labour costs have risen sharply ñ the OECD (Organization for Economic Cooperation and Development) calculates an increase of 17% since 2005. And, although the strong Canadian dollar is a large part of this change, sluggish productivity is a key player as well. As Mr. Macklen points out, "a cheap currency is not a business strategyî. There is another risk as well. While household spending has been instrumental in supporting the economy during the recession, cash-strapped Canadian consumers cannot be expected to continue spending faster than they are earning. What should be done and by whom? The government has established a stable foundation for business growth, Mr. Macklen noted. But, it is now up to the private sector to step up to the plate. Research indicates that productive businesses focus on: Investment in machinery and equipment (especially technology) Research and development and innovation Well-educated workers Competition in foreign markets (Asia and Latin America are suggested) Canada has a well-educated workforce but companies could add value by seeking employees with post-graduate education. In the other areas, this country has fallen behind and improvement is needed in order to be able to compete in the global marketplace. In closing, Mr. Macklen urged Canadian businesses to invest in their companies in order to raise competitiveness through greater productivity. Click here to read the entire speech. ADDITIONAL EDUCATIONAL RESOURCE: MASTER Your Investment in the Family Business ñ How to Increase After-Tax Wealth

As most countries are struggling with deficits and debt, governments are putting increasing emphasis on identifying strategies that put their tax revenues at risk.  Canada is revising its "early disclosure rules" to make the taxpayer, promoter and advisor jointly and severally liable for penalties for non-disclosure.  Under the old rules only the promoter was at risk of penalties. This initiative is in support of a new global initiative entitled Tackling Aggressive Tax Planning Through Improved Transparency and Disclosure, wherein the Organization for Economic Co-operation and Development (OECD) reviews efforts in several countries to discover and discourage aggressive tax practices, such as charitable donation schemes. Systems of mandatory disclosure are compared in the report for countries including Canada, Ireland, Portugal, the U.K. and the U.S. These initiatives will assist tax authorities in targeting aggressive schemes in a timely manner. In Canada, the Province of Quebec has already implemented mandatory early disclosure rules. The 2010 Federal Budget contained proposals defining a "reportable transactionî as an avoidance transaction that exhibits at least two of the following three hallmarks: A tax advisor and/or promoter is entitled to fees tied to the tax benefit. The tax advisor and/or promoter requests "confidential protectionî i.e. the taxpayer is restricted as to whom he can provide details of the tax benefit. The taxpayer obtains contractual protection i.e. insurance against failure of the transaction, expenses incurred and/or return of costs. These measures will apply to transactions after 2010. Disclosure is required by the filing deadline for the tax year to which the tax benefit applies. Tax payers and their advisors should research any tax strategy considered that may fit the definition of "avoidance transactionî, to see if it is subject to the early disclosure rules. ADDITIONAL EDUCATIONAL RESOURCE: MASTER Your Taxes ñ How to maximize your after-tax returns

On January 25, 2011, the International Monetary Fund released its World Economic Outlook Update. This document provides an interesting insight into the global financial recovery which Distinguished Advisors may wish to share with their clients in making investment decisions this RRSP season.  Describing progress as a "two-speed recoveryî, the IMF explains that growth is slow in the developed world because of high unemployment, and concerns in Europe. In emerging markets and developing countries growth is robust to the point of overheating in some areas, and inflation is a concern. Although the global recovery is expected to continue, the instability of the U.S. housing market and rising commodity prices pose some downside risk. Going forward, governments and households in advanced economies have to reduce debt and balance budgets while keeping reform of financial systems front and center.   The IMF growth forecast has been marked down for Canada in this report.  Two factors flagged in the negative are  high household debt levels, and on the external environment, risks particular to the U.S. economy.  The risk specific to our neighbor to the south were summarized as follows:   "The absence of a credible, medium-term fiscal strategy would eventually drive up U.S. interest rates, which could prove disruptive for global financial markets and for the world economy.  It is thus even more critical that policies be put in place to bring debt down over the medium term.  Such measures could include entitlement reforms, caps on discretionary spending, reforms of the tax system to boost fiscal revenue, and the establishment or strengthening of fiscal institutions."   ADDITIONAL EDUCATIONAL RESOURCE:  Distinguished Advisor Conference 2011.  The theme is Recovery.  Lowest tuition fees achieved with registration by February 15, 2011.

Tax slips for Old Age Security (OAS) and Canada Pension Plan (CPP) were mailed in January and were available online as of February 1, 2011. Pensioners can register for online access through My Service Canada Account after applying for and receiving a Government of Canada Access Key. Canada Pension Plan Statements of Benefits and details of Employment Insurance claims and tax slips can be found as well. Please click here for more information.   ADDITIONAL EDUCATIONAL RESOURCE: Now is the time to discuss RRSP and TFSA opportunities for seniors and prepare to reduce March 15 instalment payments where incomes have fluctuated. For wealth of information on tax planning for seniors, Essential Tax Facts 2011 by Evelyn Jacks is a "must have" reference.