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. 

Partnership Transactions There are certain transactions that are entered into by partnership and their partners which are unique to this form of business structure. We will review the bookkeeping for some of these. Contribution of Property When a partnership is set up, the partners typically contribute property ñ including cash - to the partnership to establish its operations. (A partner need not contribute property. A partner may contribute services, including services to be provided in the future.) From an accounting perspective, the contribution of property to a partnership by partner must be accounted for twice: it represents a disposition of the property by the partner and an acquisition of the property by the partnership. There are general principles which underlie the accounting for these transactions: For financial reporting purposes, both transactions should be accounted for at the fair market value of the property involved. The partner contributing the property will normally have to account for sales taxes that normally arise if the property is subject to tax. A partner and partnership can normally elect for income tax purposes to have the contribution of property accounted for at tax cost, so that the partnership takes over the partner's tax cost of the property and the potential for capital gain or loss and/or recapture on a subsequent disposition. However, this election should not affect the bookkeeping for the transaction. Withdrawal of Property A partnership cannot pay a salary or wage to a partner. When a partner withdraws cash or other property from a partnership, the partnership records the withdrawal as a disposition of that property and a debit to the partner's draw account. Typically, a partner draws cash. Where a draw is funded in kind, the partnership accounts for a disposition of the property at fair value. Sales taxes must be accounted for if they are otherwise due. Disposition of an Interest An interest in a partnership is a capital property, much like a share in a corporation, and it can be bought and sold separately. A purchase and sale of a partnership interest is a transaction solely between the partners involved and does not affect in any way the accounts of the partnership. Excerpted from Advanced Bookkeeping for a Selection of Business Profiles, one of the courses that comprise the Certified Bookkeeping Specialist program.

Advisors - a golden opportunity for you to move your business to the next level and lock in your client relationships. Imagine inviting a client to an evening of wine tasting with Tony Aspler or tickets to a Raptors game. An online auction is currently underway and running until noon on Friday, September 12th - so make your bids now! This auction has been organized as a fundraiser for a childrens' home in Tanzania and items of interest include: Lunch with Lloyd Robertson or Sherry Cooper Registration at the Knowledge Bureau's Distinguished Advisor Conference Snooker with former world champion Cliff Thorburn A trek up Mount Kilimanjaro Weekend at Four Seasons Whistler For more details on the exciting online auction click here.

Manitoba residents: are you aware that you can benefit from the Manitoba Tuition Fee Income Tax Rebate if you graduated from a post-secondary institution since January 1, 2007? If you are now employed in Manitoba and pay tax in the province, you can apply for a rebate of 60% of your tuition costs to reduce the income tax payable. To apply for the rebate, the total tuition paid over the years you attended school must be reported on your T1 income tax return. A portion of these fees paid will be used to reduce the amount of Manitoba tax you are required to pay. The provincial tax payable will be reduced over the next six or more years, and you can even delay the first claim by as much as ten years. Example: Aaron graduates in 2008, total tuition paid $20,000 Maximum claimable - $12,000 (60% of tuition) Claim in Year One Manitoba Tax Payable - $600 Tuition Rebate is the lesser of: 10% of tuition ($1,200) $2,500 (maximum available annually) Manitoba tax payable - $600 Rebate - $600 Remaining tuition claimable $11,400 ($12,000 - $600) Year Two Manitoba Tax Payable - $2,400 Tuition Rebate is the lesser of: 10% of tuition ($1,200) $2,500 (maximum available annually) Manitoba tax payable - $2,400 Rebate: $1,200 Remaining tuition claimable $10,200 ($11,400 - $1,200) Years Three to Ten: Assuming Manitoba tax payable remains above $1,200 into the future, the tuition rebate will be available for at least the next eight years. Here are the important points related to the Manitoba tuition fee income tax rebate: 60% of tuition fees paid up to $25,000 are claimable under the program Initial claim must be made within 10 years of graduation The benefit can be applied over the next 6 to twenty years Six years is the minimum period over which the rebate can be claimed Tuition fees DO NOT have to be paid in Manitoba (CRA must recognize the institution in order to make the initial claim) You must live in Manitoba to make the tuition claim on your return Note that eligible grads have up to 20 years in which to claim their rebate. The minimum period over which the full rebate can be claimed is six years, so in principle, someone could wait 14 years before starting to file their claims. Thus, eligible 2007 grads who neglected to file a claim or were unaware of the program have lost nothing. Per Manitoba Finance statistics, for the 2007 tax year the total amount of tuition claimed was $20.3 million, or an average of $4,265 per claimant. Saskatchewan has a similiar program called The Graduate Retention Program, which is a refundable income tax credit which rebates up to $20,000 of tuition fees paid. There are various rebates available to students based on the length and type of program they are enrolled in. In New Brunswick, all students enrolled for the first time at a university and attend a provincially funded university are eligible for a $2,000 one time benefit. For further information on any of these programs, check with your provincial government's Department of Finance.

As we mentioned in last week's Breaking Tax and Investment News, it's that time of year again, back to school and back to enrolling our children in their various activities. Most of us are aware of the Federal government's Canada Fitness Credit, which is a tax credit of up to $500 ($1,000 for disabled children) provided for enrolling children in an eligible program of physical activity, so let's do a quick review of the eligibility guidelines: Eligibility for the Credit: Fees must be paid in respect of eligible expenses in an eligible program of physical activity. Eligible expenses will include those for the operation and administration of the program, instruction, renting facilities, equipment used in common (e.g. team jerseys provided for the season), referees and judges, and incidental supplies (e.g., trophies). A program must be: ongoing (either a minimum of eight weeks duration with a minimum of one session per week or, in the case of children's camps, five consecutive days), supervised, suitable for children, and substantially all of the activities must include a significant amount of physical activity that contributes to cardio-respiratory endurance plus one or more of: muscular strength, muscular endurance, flexibility, or balance. Organizations providing eligible programs of physical activity will determine the part of the fee that qualifies for the tax credit. Ineligible Expenses: the purchase or rental of equipment for exclusive personal use travel, meals and accommodation. Tax Receipting. Claims for the children's fitness tax credit will need to be supported by a tax receipt that contains information sufficient for the CRA to monitor compliance. Similarly, organizations will be required to keep relevant books and records. Child Care Expenses. To ensure that the same expenses are not claimed under both the children's fitness tax credit and the child care expense deduction, an individual will not be allowed to make a claim for a children's fitness tax credit in respect of amounts for which any person has made a claim under the child care expense deduction. Public Transit Credit: This credit was introduced in 2006 and is claimable for every family member by either spouse or the family member depending on best benefit. Allows for costs of public transit passes that cover a period of at least 30 days This requirement is relaxed for purchases relating to travel after 2006, in two respects. First, the cost of an electronic payment card will qualify for the credit provided the card provides at least 32 one-way trips in a period not exceeding 31 days. Secondly, the cost of a weekly transit pass covering a period of 5 to 7 days will also qualify so long as the taxpayer purchased at least four consecutive weekly passes. Appropriate receipts are required. In addition, a transit authority issuing an electronic payment card must provide sufficient documentation of use to allow the CRA to audit the claim.

The Canada Revenue Agency has announced the prescribed annual interest rates that will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from October 1, 2008, to December 31, 2008. Income tax The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance Premiums will be 7%. The interest rate paid on overpayments will be 5%. The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 3%. Each of these rates remains unchanged from the previous quarter. Other taxes The interest rate on overdue and overpaid remittances for the following taxes will be: Tax and Duty Overdue remittances Overpaid remittances GST 7% 5% HST 7% 5% Air Travellers Security Charge 7% 5% Excise Tax (non GST) 7% 5% Excise Duty (except Brewer Licensees) 7% 5% Excise Duty (Brewer Licensees) 5% N/A Softwood Lumber Products Export Charge 7% 5%

NEWS RELEASE August 28, 2008 COTTAGE COUNTRY DILEMMA: HOW TO PASS IT ON--CONFLICT FREE Winnipeg, Manitoba. The days are getting shorter, the nights longer, and the questions more frequent: when should we start talking about passing on the family cottage? Filled with childhood memories and intergenerational labor, for many families this is a bigger dilemma than meets the eye. Renowned Winnipeg-based national financial educators and authors, John Poyser and Evelyn Jacks have teamed with The Winnipeg Free Press to present the first-ever strategic planning workshop for cottage owners, entitled "Pass It On!", at The Winnipeg Convention Centre, Saturday October 18 from 8:00 AM TO 12:30 PM . "Cottage Owners flounder when it comes to succession planning" says lawyer John Poyser of the Wealth Management Group at Inkster, Christie Hughes. "This half day workshop will cover everything you need to know and provide answers to cottage owners in need of concrete direction, including a Cottage Succession Planning Guide to discuss with family as well as legal and financial advisors." Evelyn Jacks, best-selling tax author and President of The Knowledge Bureau, agrees. "There are significant personal tax issues to be considered, and we are pleased to partner with John's firm and The Winnipeg Free Press to provide this unique educational seminar". "This workshop is a natural fit for The Winnipeg Free Press with many of our faithful readers now in the position to concern themselves with succession planning." says Marnie Strath, Marketing Director of The Winnipeg Free Press. Pass It On! will answer difficult, yet common questions in an informational and entertaining session. The audience will consider: Should the cottage be in joint names? Should we give it to the kids now? Or leave it to the kids in the will? Who will pay for the new roof? How can we make sure each child is treated equally? How do we deal with this as a blended family? Adult kids living common lawóis your cottage at risk? What if I have a cottage in one province and a house in another? How do we deal with the one child who lives in Britain or Vancouver? What should we do when one of my children wants cash? The workshop is advantageously priced to encourage family participation. Brunch is included. For more information contact: The Knowledge Bureau online at knowledgebureau.com or call 1-207-953-4769. Click here to register now. For interviews with John Poyser and Evelyn Jacks please contact Marion Trapp at the number above. ABOUT INKSTER, CHRISTIE, HUGHESThe Wealth Group of Inkster, Christie, Hughes, LLP is a boutique practice group focusing on succession issues, including cottage succession. ABOUT THE KNOWLEDGE BUREAUThe Knowledge Bureau is a leading educational publisher and national post-secondary educational institute specializing in certificate and designation courses for financial advisors and their clients.