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. 

Legislation that will give Ontario parents of active children a refundable tax credit has passed into law. This will put up to $50 per child age 16 and under, and up to $100 per disabled child age 18 and under, directly into the pockets of families, by filing a 2010 tax return. The costs of both fitness and non-fitness activities are eligible back to January 1st, 2010. According to the Ontario Finance Department, the following are eligibility criteria: Fitness activities: the same as for the federal Children's Fitness Tax Credit; that is, the activities must require a significant amount of physical activity that contributes to cardio-respiratory endurance, plus one or more of muscular strength, muscular endurance, flexibility, and balance. Non-fitness activities must fall under one of the following categories: Instruction in language, music, dramatic arts, dance and visual arts. Activities with a substantial focus on wilderness and the natural environment. Structured interaction among children where supervisors teach or help children develop interpersonal skills. Enrichment or tutoring in academic subjects. This tax credit would not support programs that promote illegal activities. ADDITIONAL EDUCATIONAL RESOURCES: Distinguished Advisor Workshops January 2011, which will discuss personal tax changes in detail.

It's trueóthere are fewer places for tax dodgers to hide these days. Global finance ministers are clamping down on tax havens. Canada has agreed to comply with the standard for the exchange of tax information set by the OECD (Organization for Economic Co-operation and Development). Did you know that within the past year and a half Canada has signed 11 Tax Information Exchange Agreements (TIEAs)? "These agreements will help Canadian tax authority's combat international tax evasion,î says Finance Minister Jim Flaherty. Countries with whom Canada does not have tax treaties have signed TIEAs with Canada. These include San Marina, Anguilla, Bermuda, the Cayman Islands and the Turks and Caicos Islands. Additional agreements with other countries are in progress. For more information: http://www.fin.gc.ca/n10/10-107-eng.asp ADDITIONAL EDUCATIONAL RESOURCES: Cross Border Taxation Course

Now is the best time to discuss whether the December 15 quarterly instalment will be necessary for clients who previously met the profile. Farmers, who must make one instalment on December 31 should be especially careful. The prairie rainfall wiped out many crops and it is quite possible a reduced or no tax instalment will be required this year. CRA's billing system, however, may tell a different story. Any professional advisor and their clients will avoid overpayment however by completing an estimation of 2010 income and collaborating with financial advisors to maximize RRSP contribution room to get the results needed to avoid the payment. To help, CRA released a new version of "Paying Your Income Tax by Instalmentsî (Publication number P110) on November 18. This is a great resource for information on instalment payment amounts, remittance schedules, how to reduce required instalment obligations and interest and penalties for late or missing payments. In the past, tax instalment calculations include net tax owing and CPP payments on earnings. Voluntary E.I contributions for the self-employed on line 430 are now part of the formula as well. The complete publication is available: http://www.cra-arc.gc.ca/E/pub/tg/p110/README.html ADDITIONAL EDUCATIONAL RESOURCES: Essential Tax Facts, 2011 and Introduction to Personal Tax

On November 4, CRA released an update to the P151 publication; an excellent reference for Canadians who vacation or spend part of the year in the U.S. The guide includes information on completion of both Canadian and U.S. Tax returns. The Internal Revenue Service (IRS) has contributed to the information contained in the section on U.S. Tax Laws. Readers will find information on health coverage, ownership of U.S. property and a discussion of residential ties. U.S. gambling and lottery winnings are also discussed. This is a must-read for anyone who plans to travel to our neighbor to the south this year! ADDITIONAL EDUCATIONAL RESOURCES: EverGreen Explanatory Notes and Cross Border Taxationóa certificate course from the Knowledge Bureau. (link) TAX EVASION: FAILURE TO ACCOUNT FOR MIXED USE EXPENSES A real estate agent from Hammonds Plains, NS has been fined $25,126 for evading taxes by falsifying business expenses. This amount is more than 120% of the taxes owed. Personal expenses were altered to look like business expenses and she arranged for invoices for shared expenses to be reissued as her expenses alone. HST returns were also falsified. In addition to court-imposed fines, persons convicted of tax evasion must file or re-file the tax returns in question and pay the taxes owing plus interest. Civil penalties may also be assessed by CRA. For more information see: http://www.cra-arc.gc.ca/nwsrm/cnvctns/ns/ns101103-eng.html ADDITIONAL EDUCATIONAL RESOURCE: Essential Tax Facts 2011

Significant change is about to occur to the Canada Pension Plan, and tax and financial advisors should use this opportunity to do some "knowledge marketingî to their clients before 2012 is upon us. Canadians who have already started to receive CPP and are not going to be working in the future will not be affected by these changes. However, for the rest of us, the following changes will apply: The monthly amount will increase for those waiting until after age 65 to receive CPP. The longer you wait, the more you get until age 70. The monthly amount will decrease for those taking CPP between ages 60-65. The sooner you begin the less you will receive. You will not have to stop working in order to begin receiving CPP. If you are under 65, receiving CPP and still working, you and your employer will have to continue making CPP contributions. This will increase your benefit, however, later. If you are between 65-70 you can choose to continue to make CPP contributions. If you contribute then your employer has to do so as well. This will increase your benefit when you do begin to receive it. A longer period of low earning years will be excluded from your CPP benefit calculation. This too will increase your benefit. The links below contain more detailed information for the general public: http://www.servicecanada.gc.ca/eng/isp/common/proceed/socinfo.shtml http://www.servicecanada.gc.ca/eng/isp/cpp/postrtrben/main.shtml For professionals, the information for Financial Advisors is especially interesting at this link: http://www.servicecanada.gc.ca/eng/isp/cpp/postrtrben/advisors.shtml ADDITIONAL EDUCATIONAL RESOURCES: Introduction to Personal Tax Preparation, Tax Efficient Retirement Income Planning

  The Distinguished Advisor Conference 2010 concluded in Orlando this week, to rave reviews and hundreds of business building ideas for the over 130 advisors in attendance. Amongst the top strategic business building thoughts: A greater focus on family planning is important. Professionals need to be more disciplined with clients and their children by transitioning from individual to family planning. Advisors play a key role in financial literacy education. Educate your team and implement a "knowledge campaign.î Use plain language and be sure to communicate carefully with clients to ensure they really understand your message. Focus on family education: by helping parents, you are actually helping their children. Understand financial behavior. Start with your personal relationship with money. It will affect how you speak to your clients about theirs. Be conservative with your clientsí moneyóhelp them to manage debt and risk while building wealth. Teach your clients the difference between good and bad debt. These are difficult times. No individual is an island. Our children and grandchildren are the future. Lead by example: ask and learn more about the family. No matter what clients are going through, professionals need to let them know there is a light. Strategic financial planning includes electronic communications with the whole family. If you want to connect with younger generations, you must have electronic messaging strategies and use internet-based communications tools to grow your business. The economy is driven by confidenceóadvisors need to help instill confidence in clients in working with their money through intergenerational planning. . .seven generation thinking! Reassure them that with proper strategic planning and your counsel they will be okay. Encourage clients to take advantage of all tax credits related especially to pre-retirement planning, retirement planning, medical expenses and disability-related tax preferences. This is a topic often neglected by financial advisors. Remember that 20% of lifetime health care costs occur in the last year of lifeóare you ready to be in the business of "ego, dignity and respect?î Statistically, 8 out of 10 clients are looking for new advisorsónow is a good time to ask for referral business. You do important work. ADDITIONAL EDUCATIONAL RESOURCE: For more information on next yearís DAC in Palm Springs, CA, November 13 to 16: see www.knowledgebureau.com/dac