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 is partnering with the Financial Forum to provide you with comprehensible, accessible information which will quell monetary woes A recent survey of Canadians, conducted by the Financial Forum & Wealth Management Expo, revealed that 81 per cent of respondents who described themselves as financially knowledgeable and engaged, have a high level of confidence in their portfolio strategies and a surprising lack of panic in what has been described as the worst financial meltdown since the Great Depression. Despite the recent fears gripping investors worldwide, the financially well versed are remaining cool, calm and collected and see an abundance of opportunity in the markets' current instability. In fact, the survey shows, that more than 60 per cent of respondents said they really enjoy getting up to speed on their investments, a stark contrast to the general public, many who generally find money matters intimidating. "What we're seeing is that those armed with the knowledge they need to take control of their personal finances are reacting with relative ease to the current market conditions, because they feel they have the tools to make the most of the situation," said Harry Apostolatos, Financial Forum Event Director. "They can distill through the noise and as such keep a reasonable perspective on shifting dynamics." Apostolatos points out that 65 per cent of the Financial Forum's survey respondents said they remain calm when markets are volatile, knowing that the markets will bounce back eventually. In fact, only one quarter said they felt a lack of control over their investments despite the unpredictability of the markets. "What it comes down to is that those who feel they understand what's happening and can make personal, educated choices about how to manage their investments tend not to feel panicked," said Apostolatos. "It goes back to the concept of 'knowledge is power' and almost all respondents agreed that principle is just as relevant when it comes to money matters." For this reason the Financial Forum has partnered with The Knowledge Bureau, Canada's primary educator in the tax and financial industry. "Though it may appear to be a daunting task, it is critical that in these times of volatility, investors educate themselves on their options and determine what's best for them," said Evelyn Jacks, bestselling author, founder and president of The Knowledge Bureau. "We've found that when investors are equipped with access to the right information, they gain and remain in control." Mrs. Jacks urged those people who may feel overwhelmed by financial matters, not to shy away from developing their expertise because they're time crunched. "By investing a little time in your financial literacy, you will feel more empowered in making financial decisions." Jacks added that the Financial Forum is the ideal opportunity for those who want to gain valuable insight and knowledge on financial matters. As a wealth management expo, the Financial Forum brings together experts on all facets of financial planning to offer customized advice to individuals looking to increase their market savvy. Attendees can also participate in seminars, workshops, tax-deductible certificate courses offered by the Knowledge Bureau or attend specialized pavilions and network with investors to exchange ideas and strategies. While 63 per cent of respondents say they are investing differently given the current economic crisis, investors realize that although things are a little scary out there, it's not all doom and gloom. "In fact, when asked when investors were asked when they felt most in control of their investments more said it was when they understood how their investments were working (44 per cent) versus when markets were stable (26 per cent)," said Apostolatos. "Ninety-four per cent of respondents said that knowledge is power when it comes to money matters. They just need to arm themselves with the information necessary to take advantage of the opportunities that exist." Ninety two per cent of respondents were more inclined to increase their knowledge if doing so were interesting and engaging, while 43 per cent say lack of access to easy to understand information is the biggest barrier to becoming more educated on financial matters. The Financial Forum provides investors with a wealth of knowledge in an open setting as a means of helping Canadians better understand their financial matters and the direction they would like to take. Additional Research Findings: Given the current economic climate, 45 per cent of respondents are saving differently than they have in the past When asked about their feelings over the current economic conditions, 70 per cent of respondents said there are some good buying opportunities to be had while only 23 per cent felt scared and powerless When asked what respondents fear the most, 23 per cent said outliving their retirement savings The 2009 financial goal for 57 per cent of respondents is feeling comfortable with the state of their investments despite market volatility Investors clearly want knowledge: When asked how they would feel if they were to have more financial knowledge, 45 per cent said they would feel more confident and 43 per cent said they would feel empowered and in control versus only seven per cent that said they would feel overwhelmed by knowing too much about market ebbs and flows The 2009 Financial Forum will take place in three Canadian cities: Toronto ñ January 15-17, 2009 Vancouver ñ February 27-28 Calgary ñ March 13-14, 2009 About the Survey The survey was conducted by Financial Forum from October 6 ñ 15, 2008, with a representative sample of 815 male and female respondents aged 18 years and older across Canada. About the Financial Forum The Financial Forum & Wealth Management Expo is Canada's premier financial event where exhibitors, investors and advisors meet to exchange ideas; discover new products and services; benefit from robust accredited programs of financial education; and receive expert advice and timely information. About The Knowledge Bureau The Knowledge Bureau is Canada's premier national designated educational institute focused on providing professional development for advisors in the tax and financial services, and home of the new series of books focused on empowering consumers, amongst them: Master Your Money Management, Master Your Retirement and Master Your Taxes. For more information or to schedule an interview with a Financial Forum spokesperson, or with Evelyn Jacks of The Knowledge Bureau, please contact: Robyn Breslow On behalf of Financial Forum (416) 924-4442 ext. 256 rbreslow@apexpr.com

By Evelyn Jacks How do you survive a tax audit? Do you have any rights when you receive an unannounced visit by an authorized person from the tax department? In fact, you do but know that co-operation with a tax audit is required under the Income Tax Act. Every person carrying on a business and required to pay or collect amounts under the Income Tax Act must keep records and books of account containing enough information to enable the amounts to be paid to be determined. You must keep this information until six years after the end of the taxation year to which those records relate. If you have failed to deliver up the records in response to an audit request, the Income Tax Act gives the tax department the authority to search premises and seize records. You are allowed to retain copies of the seized documents and the tax department must provide allowed access for you and your representatives to inspect the seized documents as required at all reasonable times during normal office hours. While surprise visits at your home by a tax auditor are unusual (a letter requesting certain files for inspection is more routine), an authorized person employed by CRA may "Öat all reasonable times, for any purpose related to the administration or enforcement of this Act: inspect, audit or examine the books and records of a taxpayer examine property in an inventory of a taxpayer" Under these powers, the CRA is also authorized to enter into any premises where any business is carried on, property is kept or any other activities are undertaken in connection with the business or property, or books or records, and to require that the owner or manager provide reasonable assistance and answer all proper questions. If you have a home-based business, this includes your home. The taxpayer does have certain rights including the right to see a written request for information (you should request this before you allow entry to your premises) and a list of issues to be answered. The tax auditor may not enter your dwelling without your consent unless a search warrant is produced. In addition, you should know that third parties approached by the tax department are not required to provide information or documents related to business dealings with you or other unnamed persons or third parties unless authorization has been given by a judge to obtain this information. You should also be aware there is significant co-operation between jurisdictions and also tax treaties that govern how you are taxed when you reside in more than one country. A taxpayer who is being investigated by audit is entitled to be present and to be represented by counsel throughout the inquiry unless it is ordered otherwise. (The tax department would have to show that your presence would jeopardize the process in that case.) Likewise, those who act as witnesses, providing evidence in an inquiry, may be represented by counsel. But forget about taking the tax auditor on in a duel . . . no taxpayer is allowed to physically or otherwise interfere with, hinder or molest an official of CRA (!). Evelyn Jacks is the author of Essential Tax Facts and Master Your Taxes and President of The Knowledge Bureau, knowledgebureau.com.

Registered retirement income funds or RRIFs and the requirement to withdraw certain minimums from them every year, are also of particular concern to many retirees given the current market conditions. No one wants to be generating losses because of the financial meltdown if they can afford to wait it out. The RRIF withdrawal rules do not provide for such an option. In view of this, the Government is proposing RRIF annuitants be allowed to reduce their minimum withdrawal by 25% for the 2008 tax year. For example, if an individual would be required to make a $20,000 withdrawal under the current rules then that minimum amount would be reduced to $15,000 under the new rules. Taxpayers who have already withdrawn more than the reduced minimum amount would be allowed to re-contribute the excess amount (up to $5,000 in this example) back into the RRIF. The deadline for recontribution is the later of March 29, 2009 and 30 days after the proposed legislation is passed. Taxpayers making these recontributions will be allowed to claim a deduction for the amount recontributed on their 2008 returns. Therefore significant milestones for the month of March 2009 are the following: March 2 Age eligible taxpayers with unused RRSP contribution room may make contributions to that plan. March 15 Quarterly instalment payment due March 29 Recontributions to an RRIF (or 30 days after legislation is passed, whichever is latest) The December 15 instalment payment should of course be reviewed in light of these changes and reductions in income in 2008 overall. It may not be necessary for seniors to make that December 15 instalment; avoiding further erosion in retirement savings values caused by withdrawals in the current market. In addition, as reported by example in the last edition of this publication, a more important opportunity resides in the ability to make ìin kindî withdrawals, thereby allowing seniors to avoid locking in losses on their equity values and in fact providing them with the opportunity to earn tax advantaged gains on the shares now held outside the RRIFs. The November 27, 2008 Economic Statement underscores this: "The income tax rules, in fact, permit 'in-kind' asset transfers to meet the minimum withdrawal requirementsóthey do not require the sale of assets. The in-kind distribution of assets allows individuals to meet the RRIF minimum withdrawal requirements and keep their assets intact, so that the assets may benefit from future market growth." Advisors and their clients should discuss these opportunities immediately.

On November 27, 2008, Finance Minister Jim Flaherty presented the 2008 Economic and Fiscal Statement for Canada, providing an update of Canada's current and short term financial outlook, which points to a recovery by 2011 to the fiscal outlook predicted in the 2008 budget and some temporary tax relief for seniors as well, while taking the pressure off organizations struggling with current pension funding deficiencies caused by the world financial crisis. Special reports on these rules follow. Reduction in amounts required for minimum withdrawals in RRIFs for 2008 Economic and fiscal outlook statistics show recovery, soon Extension of private pension plan solvency funding from 5 to 10 years may provide reprieve In addition, spending limitations, including the elimination of $1.95 per vote subsidy by taxpayers to political parties effective April 2009 and annual wage increase limitations for public service employees of 2.3% for 2007-08, and 1.5% from 2009 to 2011. These two controversial measures may rock the boat for a minority government.

The Honourable Jim Flaherty, Minister of Finance will be presenting an Economic and Fiscal Statement at 4:00 pm EST on Thursday, November 27th. The Knowledge Bureau will be preparing an analysis of the statement and will provide you with a special report.  Expect the report in your e-mail inbox on Friday morning. To keep current with all financial and economic news try the EverGreen Explanatory Notes DEMO TODAY! Or call us to subscribe: 1-866-953-4769.

The Minister of National Revenue, the Honourable Jean-Pierre Blackburn, made an announcement recently regarding steps taken to make it easier for businesses to apply for the scientific research and experimental development (SR&ED) tax credit. Due to the onerous filings previously required by the CRA with respect to SR&ED claims, many small to medium sized businesses failed to apply for the SR&ED tax credit. The Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim and accompanying guide have been made more user friendly and organized, and with a web-based eligibility tool being provided, claimants will be more likely to apply for the tax credit program which could ultimately result in more Canadian research projects being undertaken. The changes being implemented were announced in the 2008 budget. More information on this program and the changes made are available at the CRA website located at www.cra.gc.ca/sred. For more information on SR&ED and other tax credit programs, go to EverGreen Explanatory Notes on The Knowledge Bureau website. EverGreen provides an ever current in-house research and analysis department, the most recent news from The Department of Finance and CRA compliance updates.