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. 

Andrew Brash Update Andrew Brash, Knowledge Bureau Faculty member is exactly where he has trained to be. Andrew and his team continue to acclimatize to the altitude and prepare for the climb ahead. The pace climbers move from base camp can impact their entire climb. Rushing the assent leaves your body without the stamina to handle the climb. Stalling too long puts a climber at risk of missing a weather window. "Ah, Everest base camp. Some have called it a circus, a zoo, a repository for misfits, mutants and just plain strange people (ourselves obviously being no exception). It also happens to be a place where it is possible to experience warm hospitality and friendship." We will continue featuring an ongoing update on his climb to the summit as part of Breaking Tax and Investment News or you can track his progress by visiting his website http://www.andrewbrash.com/ for live updates from the expedition. Stay tuned for updates! To book Andrew as a keynote speaker for your next conference or educational event contact The Knowledge Bureau, 1-866-953-4769.

With the April 30 filing deadline just around the corner, now is a good time to review two essential questions with taxpayers: Is the taxpayer aware of the penalties and offences for non-compliance with CRA? Has the taxpayer reported all income and deducted/claimed only legitimate amounts during form filing? It's important to stay on the right side of CRA, as the agency is empowered to impose a variety of punishments on taxpayers who fail to comply with the Income Tax Act. And of course, it's important to note at the outset that, under S. 18(1)(t) fines for charges levied under the Income Tax Act are not deductible. Here's what taxpayers and their advisors need to know: Layers of Penalties Exist. Penalties are charged under S. 162 and 163 prior to the commencement of criminal prosecution proceedings, which are undertaken in cases where a taxpayer has intentionally participated in tax evasion. In such cases, the consequences of successful prosecution are covered under the charging sections of the Income Tax Act in S. 238 and 239, Offences and Punishment. If a taxpayer is convicted of an offence under S. 238, the penalties under S. 162 and 163 may not be subsequently applied. However, if the penalties were assessed before the complaint gave rise to a conviction, both penalties and offences may be charged. It is therefore common practice for CRA to issue a reassessment notice with penalty charges assessed under S. 163 prior to prosecution proceedings.  Cost of Penalties. Common administrative penalties levied by CRA for non-compliance, excerpted from The Knowledge Bureau's EverGreen Explanatory Notes include the following: Failure to file a return on time ñ 5% of unpaid taxes plus 1% per month up to a maximum of 12 months from filing due date, which is June 15 for unincorporated small businesses Subsequent failure to file on time within a 3-year period ó 10% of unpaid taxes plus 2% per month to a maximum of 20 months from filing due date Failure to provide information on a required form ó $100 for each failure Failure to provide Social Insurance Number - $100 for each failure unless the number is applied for within 15 days of the request Failure to make partnership information return ó For each such failure, the greater of $100 and the product obtained when $25 is multiplied by the number of days, not exceeding 100 during which the failure continues.  Repeated failure to file partnership information return ó For each such failure, the greater of $100 for each member of the partnership for each month or part month not exceeding 24 months during which the failure continues.  Failure to provide information with regard to a foreign-held property ó $500 per month for a maximum of 24 months; $1,000 a month for a maximum of 24 months if there is a failure to respond to a demand to file plus an additional penalty of 5% of the value of the property transferred or loaned to a foreign trust or the cost of the foreign property where failure to file exceeds 24 months Gross negligence: false statement or omission of information in the return - 50% of tax on understated income with a minimum $100 penalty. This penalty will also apply to a false statement relating to the GSTC. False statements or omissions with regard to foreign properties ó 5% of the fair market value of contributions made to the property, minimum of $24,000 (Note: the burden of proof for establishing facts leading to penalties is on the Minister) Effect of carryback of losses ó Deemed not deductible to reduce penalties under S. 163(2.1) S. 163(4) Late or insufficient instalments ó 50% of interest payable exceeding $1,000 or 25% of interest payable if no instalments were made, whichever is greater. Misrepresentation by a Third Party: penalty for tax planning arrangements or valuation activities ó the greater of $1,000 and the total of gross entitlements from the plan or in all other cases, $1,000 Third party Participation in make of false statements ó greater of $1,000 and the lesser of the penalty to which the taxpayer is liable to under S. 163(2) and the total of $100,000 plus the person's gross compensation Failure to deduct or remit source deductions ó 10% of amount not withheld, or remitted Second such failure in same year ó 20% of amount not withheld or remitted if this was done knowingly or through gross negligence. Cost of Offences and Additional Punishment. Convictions under S. 238 and 239 result from criminal prosecution. The taxpayer must be found guilty beyond a reasonable doubt in order to be charged with these consequences. The taxpayer's advisors can also be found guilty and charged under these sections. Here are some of the consequences: Failure to make or file a return as required ó A fine of not less than $1,000 and not more than $25,000 or both fine and imprisonment for a term not exceeding 12 months. Tax Evasion including making of false, deceptive statements, in a return, certificate, statement or answer, destroying, altering, mutilating, books or records, assenting to false or deceptive entries, or otherwise willfully evading tax or conspiring to commit tax evasion with any person ó A fine of not less than 50% and not more than 200% of the amount of tax sought to be evaded or both the fine and imprisonment of not more than 2 years.  Tax Evasion, but relating to the claiming or refunds or credits - A fine of not less than 50% and not more than 200% of the amount of tax sought to be evaded or both the fine and imprisonment of not more than 2 years.  Prosecution on indictment: any person charged with an offence under 239(1) or 239(1.1) may be prosecuted at the election of the Attorney General of Canada to a further penalty ó in addition to any other penalty. ó A fine of not less than 100% and not more than 200% of the amount of tax sought to be evaded or credits sought to be obtained. Providing incorrect tax shelter number to another person - A fine of not less than 100% and not more than 200% of the cost of that other person's interest in the tax shelter . Contravening an order not to communicate confidential information by government official ó A fine of not more than $5,000 or imprisonment of up to 12 months or both. Communication of taxpayer's SIN ó A fine of not more than $5,000 or imprisonment of up to 12 months or both. Remember, it is every taxpayer's legal right and duty to arrange financial affairs within the framework of the law to pay the least amount of taxes possible. But if your intent is to defraud, or if you are negligent, there can be a very steep price to pay. Click on these links now for more information on the Knowledge Bureau's Tax Services Specialist programs or EverGreen Explanatory Notes.

Andrew Brash Update Andrew Brash, Knowledge Bureau Faculty member has settled into the routine at base camp. He and his team are testing rope lines and practicing rope work for the climb ahead. One of the obstacles Andrew and his team will face early in the climb on this side of Mt. Everest is the Khumbu Icefall. This formidable advisory comes with a reputation that proceeds it as one of the most dangerous stages of the South Col route. The Khumbu Icefall is at the head of the Khumbu Glacier, which advances down the mountain three to four feet a day. This movement puts the icefall in a constant state of change ñ crevasses can open up with no notice or be buried under snow, causing climbers to fall in. The icefall is close to base camp and allows climbers to do ëtest runs', exactly what Andrew and his team have done. "Today after years of reading, watching and listening to horror stories about the legendary Khumbu Icefall, I entered it with some trepidation to say the least. What I found was without doubt a serious mountaineering undertaking, but one with which I felt more comfortable than I would have imagined. It was in fact quite a relief to calm my fears concerning this infamous obstacle that is often considered the key to the mountain." We will continue featuring an ongoing update on his climb to the summit as part of Breaking Tax and Investment News or you can track his progress by visiting his website http://www.andrewbrash.com/ for live updates from the expedition. Stay tuned for updates! To book Andrew as a keynote speaker for your next conference or educational event contact The Knowledge Bureau, 1-866-953-4769.  

As an incentive to encourage young people to enrol in apprenticeship training programs, the federal government provides the Apprenticeship Incentive Grant which provides $1,000 cash per year to registered apprentices who have completed their first or second year in a designated Red Seal trade program, on or after January 1, 2007. This grant, which was intended to offset the cost of tuition, travel and tools is considered to be employment income and will be reported on at T4 slip for the year in which the grant is received.   The province of British Columbia provides additional incentives through the income tax return.  The BC Training Tax Credit - for Apprentices and Employers provides refundable tax credits for both the apprentices and their employers.  For apprentices in non-Red Seal programs the credit is $1,000 for completion of level 1 and 2 of the program, $2,000 for completion of level 3 and $2,500 for completion of level 4 or higher.  Enhanced grants are available for First Nations individuals and persons with disabilities.  For apprentices in Red Seal programs, no grant is available for completion of the first two levels, but grants for completion of levels 3 and above are the same as for non-Red Seal programs.  

Andrew Brash Update As last week's Breaking Investment News was making it's way to you, Andrew Brash, Knowledge Bureau Faculty member was arriving at base camp on the Nepal side of Mt. Everest. Unlike the Tibetan side, the journey to base camp in Nepal is largely done on foot. ìI had lots of time to think today, about what happened in 2006 (I could even see the last bit of the North Ridge for a moment), about the political events that have brought me and others here, and about home and what I am putting people through back there. However, there were some moments today where I did feel truly happy and excited to be here. The mountains here have to be seen in person to be truly appreciated.î Andrew writes in his online expedition dispatch. The Nepal base camp is 5300m above sea level and only the beginning of the challenges facing Andrew and his team. We will continue to feature an ongoing update on his climb as part of Breaking Tax and Investment News or you can track his progress by visiting his website http://www.andrewbrash.com/ for live updates from the expedition. Stay tuned for updates!

Did you know that a farmer carrying on business in a prescribed drought region may defer a portion of income earned in the year from sales of breeding animals? The amount of deferral depends on the percentage of reduction of the breeding herd: if the breeding herd is reduced by at least 15%, but less than 30%, then 30% of the sales proceeds (net of purchases) may be deducted in the year of sale; if the breeding herd is reduced by 30% or more, then 90% of the net sales proceeds may be deducted in the year of sale. The deferred amount must be included in income by the first taxation year after the farm is no longer in a prescribed drought region. The current prescribed drought regions are announced annually by Agriculture and Agri-Food Canada, after the calendar year end. For 2007, the list of designated regions include parts of southern British Columbia, southern Alberta, southwest Saskatchewan and Ontario. Click