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. 

The Knowledge Bureau Report issued on January 12, 2011, contained an error in the article: Did You Know? Part Time Studies May Qualify For Education and Textbook Credits. We extend our thanks to tax professional Nancy Williams for pointing this out. Eligible students may claim the education amount if they receive a salary or wages while taking a course related to their job. This was not the case until the rules changed in 2004. This is certainly an important piece of information for all who believe in life-long learning! For more information about the Education Amount: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/323/dctn-eng.html

On January 13th The Prime Minister announced the launch of a project that aims to reduce red tape for small and medium businesses. Did you know that the Canadian Federation of Independent Business estimates that businesses in Canada spent 30.5 billion dollars (that's 1.9% of the GDP) on regulatory compliance tasks in 2008? The smaller the business is the higher is the cost of doing business, according to Statistics Canada. The Red Tape Reduction Commission will consult with Canadians to identify compliance requirements that distract from the operation of a business and cost the employer time and money. Innovation, productivity and competitiveness suffer when a business is over-taxed with paperwork. This endeavor may provide a long lasting stimulus to the business community at a very reasonable cost. Click here for more information. Additional Educational Resources: Tax Planning for the Small Business Owner

A recent court ruling has caused CRA to change its policy on whether Wage Loss Replacement Benefits are pensionable for CPP purposes. On January 28, 2010, the Federal Court of Appeal ruled on Toronto Transit Commission v. Canada. It wrote that employees in receipt of WLRB are not able to perform services under their contract of employment therefore not pensionable under CPP regulations. CPP does not have to be deducted from these benefits and employers may apply for a refund of 2010 and current year payments and may refund employees. Past year overpayments must be requested via Form PD24: http://www.cra-arc.gc.ca/E/pbg/tf/pd24/pd24-09e.pdf within 4 years of the end of the tax year in which the overpayment occurred. Please note that this ruling does not apply to the Quebec Pension Plan. For more information: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/spcl/wglssqstns-eng.html   Additional Educational Resources: Advanced Payroll for Professional Bookkeepers

CRA has a new Tax Tip page with information on Tax Free Savings Accounts. It clarifies the type of investments that can be held and how TFSA contribution room is calculated. It also explains that contribution room freed up by withdrawing from a TFSA account is not restored until the beginning of the next tax year. The difference between a transfer and a withdrawal is highlighted as well. TFSA over-contributions are based upon the total contributed each year and not on the balance of all TFSA holdings at the end of the year. So, multiple withdrawals and re-contributions could put a taxpayer over their limit even though the balance does not change! A tax of 1% per month on the highest excess TFSA amount will be charged until the extra contributions are withdrawn. For more information: http://www.cra-arc.gc.ca/nwsrm/txtps/2011/tt110111-eng.html?=eml20110111 http://www.cra-arc.gc.ca/tx/tfsa-celi/menu-eng.html   Additional Educational Resources: Elements of Real Wealth Management

Canada Revenue Agency has a message for taxpayers who participate in gifting schemes ñ you will be audited! These gifting arrangements involve donation receipts that are issued for amounts that far exceed the money contributed to the "charityî. If the contribution is denied the taxpayer will have lost the amount given to the organization involved, the refund will have to be repaid and interest and penalties may apply. For more information: http://www.cra-arc.gc.ca/nwsrm/lrts/2010/l101223-eng.html?=eml20101223   Additional Education Resources: Fundamentals of Succession Planning  and Master Your Philanthropy

The passing of Bill C-47 has ensured that the Canadian Disability Savings Grant (CDSG) and Bond will be carried forward from the inception of the RDSP in 2008. This means that an eligible contribution in 2011 will attract Grant and Canada Disability Savings Bond (CDSB) for the years 2008, 2009, 2010 and 2011. The amount received will depend upon the family income of the beneficiary and the amount contributed. Up to $3 of grant will be available for each dollar contributed to the plan to a maximum of $3500 per year with $10,500 allowed annually for unused entitlements. The Canada Disability Savings Bond adds $1000 annually with $10,000 available each year for unused amounts. For family incomes less than $81,941 the government will pay CDSG of $3.00 for the first $500 contributed and $2.00 for the remainder to a maximum of $3500 per year. So, a $2000 contribution to a new RDSP in 2011 could attract the $3.00 grant on $500 for each of the carry back years, totaling $6000 of CDSG. For beneficiaries with a family income less than $23,855 the CDSB will add $1000 for each of the 4 years for a total of $4000. That's $10,000 of government money on a $2000 contribution ñ what a great start! It should be noted that a beneficiary has to be age 49 or under at the time of the claim to be eligible for the CDSG and CDSB. This suggests that a request for retroactive bond or grant by an overage beneficiary will be denied. Bill C-47 also allows transfers from Registered Pension Plans, RRSPs or RRIFS to the RDSP of a financially dependent child or grandchild. Transfers are included in the lifetime maximum of $200,000 contributed to each plan. This will be a valuable estate planning tool as it will allow a portion of a registered savings plan to be transferred to a lower-income beneficiary instead of having it fully taxable in the year of death. The taxable portion of RDSP payments will include grants, bonds, investment earnings and proceeds of transfers. RDSP income is excluded from calculations of federal government benefits and tax credits. Most provinces exempt RDSP payments from calculations of eligibility for income assistance programs: http://www.hrsdc.gc.ca/eng/disability_issues/disability_savings/rdsp_ptb.shtml   Additional information on Registered Disability Savings Plans is available: http://www.hrsdc.gc.ca/eng/disability_issues/disability_savings/index.shtml http://www.cra-arc.gc.ca/E/pub/tg/rc4460/README.html http://www.cra-arc.gc.ca/rdsp/