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. 

While Canadians in some parts of the country plant flowers and prepare for opening the cottage, the June 15 tax filing deadline is just around the corner. This deadline is specific to unincorporated small business owners. In fact, those business owners who will have a balance due really should file immediately as the interest clock started ticking on May 1. The filing due date for a spouse is always the same as for the deceased, but any balance owing by that person must be paid on or before April 30 to avoid interest charges. June 15 is also the second quarterly instalment payment deadline, which makes it one of the most expensive days of the year for business owners. Therefore it is important to review instalment payment filing methods if the taxpayer has an opportunity to reduce the instalment due to income fluctuations or changes in deductions or credits. Legal representatives of a deceased individual who died in 2009, will also want to file the final return by its due date, which will depend on the date of death and whether the deceased or the surviving spouse carried on a business in 2009. When a deceased individual or spouse operated a business, death occurring between January and December 15 requires filing on the June 15 due date. Otherwise the due date is six months after date of death. Note, CRA has published a simple new guide for small business owners, which can be used to discuss key issues.  View the Guide for Canadian Small Businesses by linking here.   ADDITIONAL EDUCATIONAL RESOURCES: EverGreen Explanatory Notes Basic Bookkeeping for Business Advanced Bookkeeping for Business Profiles

May 7 was an interesting day in financial news in Canada. The latest report on unemployment in Canada by Statistics Canada's Labor Force Survey shows employment increased by109,000 in April, which represents the largest monthly gain in percentage terms since August 2002. It was in the private sector that these gains occurred, in both full and part time jobs, while the public sector neither lost nor grew new jobs. These numbers looks good on Canada as our anticipated recovery continues to shape upafter the 2008 global financial crisis. Highlights follow: Wholesale and retail trade; business, building and other support services; and construction lead the way in job number increases. Employment grew in all provinces in April, with the largest increases in Ontario, Quebec, British Columbia, Alberta and Manitoba. Manitoba is the province with the lowest unemployment rate in the country. Compared with a year earlier, average hourly wages were up 2.0% in April. For more information link here for the full report from Statistics Canada.   For more information on tax planning provisions and compliance requirements subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.

On April 30, 2010 Finance Minister Flaherty unveiled Draft Legislation and Explanatory Notes related to changes in the TFSA effective after October 16, 2009. Link to the full text here.   Highlights of the changes are as follows: New Penalties for TFSA Abusers. Although Tax-Free Savings Accounts are fairly new, many have found ways to abuse it. The Department of Finance has moved quickly to stop those abuses with penalty provisions which will be effective for TFSA transactions occurring after October 16, 2009: Excess Contributions. When taxpayers make contributions over the allowed maximum, they are subject to a 1% per month penalty until the amounts are removed. However, if taxpayers are willing to pay the penalty tax in order to keep the money in the plan, hoping to reap an even higher tax-free return on the excess contribution, 100% of the gains will be subject to tax when deliberate overcontributions occur after October 16th, 2009. TFSA Eligible Investments. The same eligible investments as allowed within an RRSP will apply to the TFSA. A special rule will prohibit a TFSA from making an investment in any entity with which the accountholder does not deal at arm's length, and for occurrences after October 16th, 2009, a 100% penalty tax on the income so earned will apply. Swapping for Tax-Free Gains. When taxpayers swap investments from non-registered accounts for cash in the TFSA, and then swap them back out for a revised, higher price point, thereby leaving gains in the TFSA to be tax free, 100% of the gains are subject to tax, after October 16th, 2009. The CRA has also issued a form and two related schedules to calculate the taxes and penalties imposed on excess contributions or prohibited or non-qualified investments.  The TFSA return and any related payments are due by June 30th in the year following the end of the calendar year. RC243 Tax-Free Savings Account (TFSA) Return 2009 RC243-SCH-A Schedule A - Excess TFSA Amounts RC243-SCH-B Schedule B - Non-Resident Contributions to a Tax Free Savings Account (TFSA) Educational Resources: For more information on tax planning provisions and compliance requirements subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.

By Evelyn Jacks The March 4, 2010 Federal Budget delivered two interesting tax changes for investors and several more for executives who take advantage of stock option benefits. We'll take a look at the changes for investors in this article. Besides the scheduled increases in RRSP contribution room, there are specific changes for those who invest in RRSPs, RDSPs (Registered Disability Savings Plans) and RESPs (Registered Education Savings Plans). RRSP Maximum Contribution Room. Taxpayers can contribute 18% of their earned income to a maximum of $22,000 in 2010. This amounts to $1833.33 a month for those who qualify. However, the RRSP is also a great place to invest proceeds from inheritances or severance packages, too. The resulting deduction will reduce net income on the tax return, which is the number used to calculate refundable and non-refundable tax credits. Making that contribution can therefore save you tax dollars and increase social benefit payments as well. Tax Tip: Check out your available RRSP contribution room for tax year 2010 on your Notice of Assessment or Reassessment received with this year's tax filings. RRSP Rollovers to RDSPs (Registered Disability Savings Plans): As of March 5, 2010, the rollover rules for RRSP balances remaining at death are extended to allow for tax-free rollovers from the deceased taxpayer's RRSP to the RDSP of a surviving child or grandchild. Such rollovers are limited to the recipient's RDSP contribution room and will not generate a Canada Disability Savings Grant. However, such contributions will not be allowed until July 2011 to give the government and financial institutions time to adjust their systems to deal with such rollovers. Where the taxpayer died after 2007 and before March 5, 2010, transition rules will be put into place so taxpayers can avail themselves of similar rollovers. Tax Tip: Canada Disability Savings Grants are lucrative and can amount to a dollar match of 3-to-1 in some cases, depending on income level. Catch-Up of RDSP Grants and Bonds: Starting in 2011, contributors will be allowed to take advantage of a new 10 year carry forward of CESG and CDSB entitlements, (but starting with tax year 2008, the year RDSPs were first introduced).  These entitlements will be based on the beneficiary's income in those years.  Advisors should explore the opportunities with clients who wish to open an RDSP, and, over time, review the annual statements of CESG entitlements with planholders. When contributions are made to the plan, the CESG rate earned by those contributions will be paid as if the contributions were made in the year that the entitlements were earned. Where the entitlement will be paid at different rates, the grants will be calculated at the highest rate first. Tax Tip: Keep track of unclaimed grants and bonds for use in the future when more cash flow may be available. Evelyn Jacks is President of The Knowledge Bureau. For more information on Mastering Your Taxes and Your Personal Finances, go to www.knowledgebureau.com.   For more information on tax planning provisions and compliance requirements subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.

With successive provincial budget announcements, governments are turning to the power of sales taxes to shore up revenues and enlist the help of business to collect those taxes for them. Nova Scotia, for example, announced a hike to their sales taxes in their recent provincial budget, while Ontario and British Columbia will be moving to a harmonized tax regime in July. Those working with business owner clients in the tax and bookkeeping field could benefit greatly from deeper and more formalized knowledge in the areas of personal, corporate and GST tax matters, to better assist their clients to emerge into this post-financial crisis reality. "Today more than ever, business owners need to count on their professional document managers to know the intricate details surrounding tax compliance in a changing world and how to handle increasingly complex business transactions,î says Evelyn Jacks, President of The Knowledge Bureau, "For these reasons we have updated courses and research tools available in the DFA, Bookkeeping Services Specialist Program, featuring EverGreen Explanatory Notes, and are introducing several new courses specific to the succession planning needs of business owners.î Consulting in the area will provide important opportunities to consolidate relationships with clients, and gain referrals for new business. However, it will be important for tax and bookkeeping professionals to be on top of the most cutting edge changes, warns Mrs. Jacks. ADDITIONAL EDUCATIONAL RESOURCES: EverGreen Explanatory Notes Basic Bookkeeping for Business Advanced Bookkeeping for Business Profiles

Tax filing deadlines compel most ó but not all ó of Canada's almost 24 million tax filers to arrange their affairs and reconcile last year's taxes by April 30. However, there are many procrastinators, and as many as 20% of all personal tax returns are filed late.  June 15th is an important date as proprietorship tax returns are due then and quarterly instalments are also required. Failure to file will also cost you potentially large sums when you miss important planning opportunities. For example, tax form T1032 Joint Election to Split Pension Income must be filed by your tax filing due date (which for most people is April 30). This is a very lucrative income splitting opportunity for those receiving qualifying pension income and it would be a shame to miss the extra tax refunds due to tardy tax filing habit. Those advisors in the tax and financial services industry should be sure to call all clients who have not yet filed a return by April 30 to maximize availability of this type of provision and of course avoid late filing penalties. CRA should continue to be on the radar screen, however, with the upcoming tax filing deadline. Please be sure to diarize milestones that maximize your rights under the Income Tax Act: INCOME TAX DEADLINE MAXIMIZER WITHIN THE TAX FILING YEAR ENDING APRIL 30th March 31 T3 Slip Completion and Distribution Pension Adjustment Reversal Deadline Interest Penalty Due on RRSP Excess Contributions (T1-OVP Form) April 15th   April 30 U.S. Tax Filing Due Date   Tax Filing Deadline: Personal Tax Returns May 1 Interest accrues daily on overdue taxes owing June 15 CRA owes interest to tax filers on late processed refunds (in fact, the agency has an obligation to process refunds within 30 days of receipt of the return after April 30) Tax Filing Deadline: Proprietorship Returns - T2125 Quarterly Instalment Due Date Closer Connection Exception Statement for Aliens (IRS Form 8840) June 30 Tax-Free Savings Account Returns due   July 1 New Benefit Year: Child Tax Benefit, GST Credit, Old Age Security (file 2009 tax return to determine benefit levels) August 31 Working Income Tax Benefit Advance Payment Application for 2010 September 15 Quarterly Instalment Payment Due December 15 Quarterly Instalment Payment Due December 31 Annual Instalment Due for Farmers, Fishers January 30 Requirement to pay interest on inter-spousal loans February 28 T4 Slip Completion and Distribution March 15 Quarterly Tax Instalment due For more information on tax planning provisions and compliance requirements subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.