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. 

Your clients have spoken ñ they want one highly qualified financial advisor who will help them build income and preserve wealth, throughout each phase of their life but especially as they transition to retirement. As the trusted advisor, you must ëget it' in terms of your client's needs and wishes before building a wealth management and retirement income plan. Then position yourself as the Quarterback of an inter-advisory team of specialists who assist you and your clients in making the appropriate decisions. Here's how Jim Ruta, Knowledge Bureau faculty member and speaker describes it: "Affluent clients expect excellence and the only way to deliver it is with an expert financial team. As you assemble this team, consider who your clients are, their attributes, and then pull in the required specialists that can solve their specific financial needs." Your most important role as the Quarterback will be to help your clients determine their priorities and then to call in the experts when their particular skills are required. Coordinate and manage the team. You are the relationship manager and are responsible for the quality of the relationship each member has with your client. It's critical to pick the ëright' individuals. Be at each meeting to ëtranslate' technical information into language understood by the client and to monitor team member performance. Don't leave anything to chance ñ after all, these are your clients! The inter-advisory team approach with you as the Quarterback is the most appropriate structure to provide competent "One Stop Shopping" for the 21st century client. You can either be part of that expert team or lead it or both Ö. the ultimate winner will be your clients who get much better advice, products and support. You'll provide exceptional value to the relationship, life will be simpler, more productive and you'll attract more business and referrals than ever before! The Knowledge Bureau can help you build the necessary skills to formulate and quarterback your inter-advisory team of experts. Transform your practice by registering in the fully accredited Retirement Income Specialist program, leading to the Master Financial Advisor designation. Recognizing your busy schedule, we will work with you to help you successfully complete the courses within timeframes that suit you.  

Taxable benefits are so important to the payroll cycle that CRA has written a separate payroll guide to explain them. Every payroll clerk should have this guide at hand to determine income reporting and statutory deduction withholding requirements on an ongoing basis. In all cases, where a taxable benefit arises the value of the benefit to be included in income is reduced by any payment the employee makes to the employer with respect to the benefit. There are four basic facts about taxable benefits to remember in processing a payroll: 1. Add their Value to Gross Pay. The taxable benefit must be added to the employee's cash compensation each pay period and normal statutory deductions must be withheld from the total amount. Remember that the value of the taxable benefit is reduced by any payment the employee made to compensate the employer for providing the benefit. 2. Annualized Tax Withholding is Possible. Where a non-cash benefit is very large so that withholding of income tax will cause undue hardship, the value of the benefit and the related withholdings can be spread over the remainder of the year. 3. CPP Deductions Required. If the benefit or allowance is taxable, it will also be pensionable. Therefore Canada Pension Plan (CPP) contributions will be required to withheld, as will income tax. 4. EI Deductions May Be Required. If the taxable benefit is paid in cash and relates to insurable employment, it is insurable. Employment Insurance (EI) premiums will therefore be required. However, if the employment is not insurable under the Employment Insurance Act, taxable benefits paid in cash are not insurable and are not subject to EI premiums. Finally, if the taxable benefit is a non-cash benefit, it is not insurable. In that case, the benefit does not attract EI premiums. The T4130 Guide available in EverGreen contains a chart which clearly identifies, in alphabetical order, the various types of taxable benefits and their source remittance. This table is also reproduced electronically on the CRA web site. Excerpted from Advanced Payroll for Professionals, one of the courses that comprise the Certified Bookkeeping Specialist program.

Remittance of Source Deductions Up until recent changes in the Federal Budget, if a payroll source deduction remittance was late, the remitter was subject to a penalty equal to 10% of the amount required to be remitted, or 20% if the failure to remit was made knowingly. The penalty applied even if the remittance was only one day late. In addition, interest was charged on both the penalty and remittance until the outstanding amount was paid. Due to changes under Subsection 227(9) of the Income Tax Act, a graduated penalty regime has been implemented that replaces the 10% penalty, adjusting the penalty from 3% to 10% depending on how late the remittance is made. Effective for remittances due on or after February 26, 2008 the graduated penalty amounts will be applied as follows: 1 ñ 3 days late ñ 3% penalty 4 ñ 5 days late ñ 5% penalty 6 ñ 7 days late ñ 7% penalty More than 7 days late ñ 10% penalty Tax remittances related to non-residents under Part XIII of the Income Tax Act are also subject to the graduated penalty rules effective for remittances due on or after February 26, 2008. Mandatory Remittances to Financial Institutions Threshold 2 remitters, those with associated corporations and multiple payroll accounts with average monthly withholding amounts in excess of $50,000, were subject to a 10% penalty if the remittances weren't made directly at a designated financial institution. After February 26, 2008, if a remittance is received by the CRA at least one full day before the due date, the remitter will be considered to be in compliance with the requirements. Where the remittance is received late, the graduated penalties structure above will be applied.

Would it surprise you to know that Canada has the largest baby boom generation in the world and that people of this generation are either already in retirement or are galloping towards it over the next 10 years? Nearly 1 in 3 Canadians is now a baby boomer (age 41 ñ 60) and 1 in every 7 is now a senior. This demographic offers you huge opportunities in your practice ñ to retain current clients and attract new ones. Prepare now to meet the boomer's retirement needs! The most recent Canadian Census tells us that: The growth of the elderly population will accelerate in 2011 when the first of the baby boomers reach 65. Seniors will outnumber children within 10 years. The life expectancy of Canadians is now 82.5 years for women and 77.7 years for men, resulting in more reaching age 65 and living longer after. The average age of Canada's seniors is also rising. The proportion of the very elderly (age 80 and above) increased by 25% between 2001 and 2006 and has surpassed the 1 million mark. What is the definition of retirement today? According to Statistics Canada, retirement used to refer to someone who is: aged 55 and older is not in the labour force receives at least 50% of their income from retirement-like sources This definition is no longer relevant. Retirement for boomers can really be best described as "transitional" as many  start to think about career and lifestyle changes. Some may begin to transition by cutting back on the number of days they work, others may leave one career to pursue another, start a small business or do volunteer work. As boomers move into retirement, they are looking for several things ñ tax efficient retirement income planning, solutions on how to transition to financial independence and one trusted advisor to work with an interadvisory team to deliver a fully integrated plan. Resources for Distinguished Advisors in Retirement Income Planning for Boomers: Position yourself as that trusted advisor by ensuring you have the knowledge and the tools for engagement and the sophisticated processes you will need to take your practice into the future. The Knowledge Bureau can help. Enroll in the Retirement Income Specialist program leading to the Master Financial Advisor designation. This program is available by self study for individuals or study groups. Join us at the Distinguished Advisor Conference November 2 ñ 5 where you will explore the leading practice management issues with leaders and colleagues and think strategically about your business. The Theme? Transitioning: The Path to Reciprocity ... the two triggers to help you capture the trust of retiring boomers. Register today!

As mentioned last week, tax measures to be implemented from Budget 2008 include numerous changes relating to the application of the GST/HST. These include a number of amendments of GST and HST with respect to the following: Training for individuals with autism and other disabilities ñ Effective February 26, 2008 training that is specifically designed for individuals coping with autism or other disabilities will qualify for exemption from GST/HST. The exemption will be expanded to include training if supplied by a government; the cost of the training is reimbursed under a government program (partially or fully) or by a health professional, who in the course of a professional client relationship and is GST/HST exempt, identifies the program as a means of dealing with the disorder. Prescription drugs ñ The budget proposes to zero rate drug supplies to final consumers when prescribed by a health professional and is effective for supplies made after February 26, 2008. Medical and assistive devices ñ A number of medical and assistive devices are zero rated, and Budget 2008 has added four new categories to the zero rated list as follows: items for neuromuscular stimulation or standing therapy devices that are supplied on a written order by a medical practitioner; chairs designed for use by individuals with disabilities when supplied on a written order of a medical practitioner; chest wall oscillation systems used in airway clearance therapy and specially trained service animals used to assist an individual with a disability or impairment. Nursing services - Effective February 26, 2008 nursing services provided to individuals will be exempt from GST/HST regardless of where provided (i.e. health care facility or the individual's home). This would apply to services administered by a registered nurse, a registered nursing assistant, a licensed or registered practical nurse, or a registered psychiatric nurse, so long as the service is provided within a nurse-patient relationship. Treatment of Long-Term Residential Care Facilities ñ The application of GST/HST on these facilities will be clarified to ensure that they remain eligible for the New Residential Rental Property GST Rebate and the GST/HST exemption afforded to residential leases and sales of used residential rental buildings.

Recent changes have been made to the US-Canada Tax Convention (See July 10 release from The Department of Finance). In essence the release indicates that Canada agrees with the Technical Explanation of the Fifth Protocol that was issued by the IRS on July 10. The Knowledge Bureau is pleased to announce that an newly updated version of The Cross Border Taxation Course by John Mill is available to keep Real Wealth Managers© abreast of the application of the changes. This interesting course will especially prepare you to better work with clients who have questions about residency relating to their travels in and out of the US. A short excerpt of this course follows: The basic structure of the taxation of non-residents in both Canada and the U.S. involves two types of taxation. These types of taxation require either: the filing of a tax return; or withholding taxes on the gross amount of the payment. In general terms the dividing line between these types of taxation is whether the income is active or passive. Tax Returns Tax returns must be filed for: employment; business; and taxable property dispositions. Employment and business are dealt with in this chapter; the issues related to property dispositions are dealt with in the "Property" chapter. Both countries allow elective returns for rental income (see Property chapter); and Canada allows a return to be filed for pension income. Withholding Taxes The basic withholding tax rate in Canada is 25%. This basic 25% withholding rate is reduced by the Canada-U.S. tax treaty for all items of income except rent. Canada imposes a 15% withholding rate on payments to independent service providers. The basic withholding rate in the United States is 30%. This basic 30% withholding rate is reduced by the Canada-U.S. tax treaty for all items of income except rent. The United States imposes a 10% withholding rate on the sale of real property owned by non-residents. Exemptions Certain items of income received by non-residents are exempt from taxation. Exemptions are found within the general taxation law and are further expanded by exemptions granted by the tax treaty. In Canada these items include certain types of management fees, royalties and interest. In the U.S. these amounts include interest paid by banks and insurance companies. In addition certain types of royalties and management fees are exempt from taxation. The tax treaty adds exemptions for certain types of employment income, and business income. In addition the tax treaty exempts capital gains from the sale intangible property (shares) from taxation. Treaty Rules The tax treaty significantly modifies the source and withholding rules as follows: Salaries, wages, compensation - must be more than $10,000 or 183 days Sale of Inventory: business profit - permanent establishment Interest - 10% withholding Dividends - 5% or 15% withholding Rents - no change Patent, copyright, royalties, etc. - 10% withholding or exempt Sale of real property - shares of foreign corp. exempt Sale of personal property - exempt Pensions - 15% withholding (periodic) The tax treaty extends the number of situations in which income earned by non-residents is not taxable in the U.S. (and Canada). The most notable of these situations are: Personal services performed in the U.S. are not at taxable if they are: Dependant personal services performed for a Canadian employer for less than 183 days in a year in the U.S. Independent personal services performed in the U.S. for a U.S. employer for less than 183 days in a year in the U.S. Business income unless there is a permanent establishment Capital gains arising on the sale of personal property In the absence of the treaty these items would all be U.S. source income. The treaty does not affect the source of these items of income -- it simply provides that these items of income are not taxable in the U.S. It is important to note that income sourced in the U.S. but exempt by treaty requires the filing of treaty based return. Excerpted from Cross Border Taxation which has been updated for 2008. This course is a core course in the Investment Planning Services Specialist program and an optional course in the Tax Services Specialist program.