Tax Tip: The More Obscure Medical Expenses

Are you claiming all the medical expenses you or your clients might be entitled to? 

Approximately 4.7 million Canadians opened Tax-Free Savings Accounts since they were introduced, and about 70,000 of those account holders have been asked to provide additional information on their accounts to CRA. The government is recognizing that there was some general confusion regarding the TFSA rules by account holders as well as the financial institutions holding the accounts. A recent news release from the Department of Finance advised that the deadline for responding to TFSA letters received from CRA has now been extended from June 30th to August 3rd. Available since January 1, 2009, the Tax-Free Savings Account (TFSA) is a registered account in which investment earnings, including interest, dividends and capital gains accumulate within the account on a tax free basis. Contributions up to an annual maximum of $5000 can be made by/for those who have reached 18 years of age and are residents of Canada. There is no maximum contribution age (you can be 92, for example!), however a tax return must be filed to build "TFSA Contribution Roomî. This $5000 annual maximum amount will be indexed after 2009, with rounding to the nearest $500. The annual maximum remains at $5,000 for 2010 contributions. In the news release, the Government of Canada announced that for 2009, the first year of the program, there will be a case-by-case review to determine if tax will be waived on excess contributions that occurred during the year. In many cases, over contributions were occurring in situations when individuals were using the TFSA accounts as an ATM, i.e. depositing and withdrawing amounts frequently, and in other cases transferring TFSA amounts from one institution to another. These over contributions can result in penalties, and require the account holder to complete a form advising the CRA of the amounts for each month that an over-contribution was made during the year. Compliance Alert:    Many people are not aware of the form and schedules used to calculate the taxes and penalties imposed on excess contributions or prohibited or non-qualified investments to TFSA's. 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. Call: 1-800-953-4769 to order today.

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 late filers. Please be sure to diarize milestones that maximize your rights under the Income Tax Act: 2010   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 September15 Quarterly Instalment Payment Due December 15 Quarterly Instalment Payment Due December 31 Annual Instalment Due for Farmers, Fishers 2011 January 30 Requirement to pay interest on inter-spousal loans February 28 T4 Slip Completion and Distribution, RRSP Deadline March 15 Quarterly Tax Instalment due March 30 T3 Slip Deadline April 30 Personal Income Tax Filing Deadline 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 45 days of receipt of the return after April 30) Tax Filing Deadline: Proprietorship Returns Quarterly Instalment Payment 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.

At long last, an announcement has been made by The Honourable Keith Ashfield confirming a new simplified logbook requirement has been introduced for expenses incurred for motor vehicle use. The change is part of the strategy announced in the 2008 Federal Budget for assisting small and medium sized businesses with tax compliance. As indicated in the Federal Budget documents, one of the intentions of the initiative was to reduce the recordkeeping burden for taxpayers who claim automobile expenses. As was announced at that time, "To reduce the record-keeping burden and allow small business owners more time to devote to growing their firms, Budget 2008 proposes that maintaining a logbook during a sample period of time, that is representative of how the motor vehicle is used, be sufficient to support motor vehicle expense and taxable benefit calculations. The revised administrative policy that has been introduced allows businesses to maintain a logbook for an entire year, starting in 2009, in order to establish the use of a motor vehicle for business purposes. The logbook should be maintained for the entire year in order to establish a base year. After the base year has been established, a logbook can be kept by the taxpayer for a continuous three month period, which can then be used to calculate the business use for the entire year. The sample logbook would require the vehicle's business use to be within a 10% range of the base year's calculated annual business use. Care should be taken in the year that the vehicle is purchased or leased as there are limitations based on the type of vehicle purchased and amounts that can be claimed for tax purposes. For full details on the CRA's sample logbook policy, link here.   Click on these links now for more information on the Knowledge Bureau's Tax Services Specialist programs or EverGreen Explanatory Notes.

The third quarter prescribed rates have been announced by CRA and are continuing with the lowest prescribed rates in recent history - a 1% rate for certain taxable benefits and loans.  The biggest change is the interest rate paid to corporate taxpayers on overpayments, reduced to 1% from the 3% being paid to non-corporate taxpayers per the March 2010 Federal Budget (subject to Royal Assent).   The Canada Revenue Agency 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 corporate and non-corporate taxpayers. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from July 1, 2010, to September 30, 2010.   Income tax The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance Premiums will be 5%. The interest rate paid on overpayments by corporate taxpayers will be 1%. The interest rate paid on overpayments by non-corporate taxpayers will be 3%. The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1%. Other taxes The interest rate on overdue and overpaid remittances for the following taxes will be: Tax and Duty Overdue remittances Overpaid remittances Corporate/Non-Corporate GST 5% 1% / 3% HST 5% 1% / 3% Air Travellers Security Charge 5% 1% / 3% Excise Tax (non GST) 5% 1% / 3% Excise Duty (except Brewer Licensees) 5% 1% / 3% Excise Duty (Brewer Licensees) 3% N/A Softwood Lumber Products Export Charge 5% 1% / 3%   <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" />  Educational Resource: 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.  

As most advisors are aware, when it comes to taxes, it's not only about getting those returns filed on time, but most importantly, it's about storage and retrieval! After all the tax filing deadlines are met, the "off-season" is fraught with the potential for tax audit activity by CRA and the need to adjust returns for omissions, missed slips, and of course, the inevitable errors made during the rush! This can cause stress and strife, especially for couples. What should you do if you missed an important provision or document? Most advisors will tell their clients to come back and see them immediately upon discovery. They will also cover an important technique in avoiding expensive gross negligence or tax evasion penalties: voluntary compliance (you tell CRA about errors or omissions before they tell you, on that off-chance that you overstated deductions or credits, or understated income.) The following filing milestones should also be noted to answer these and other questions about tax compliance responsibilities all year long: Adjusting a return to correct an error or omission: 10 years following the end of the relevant taxation year. Appeals with the Tax Court: No later than 90 days from the date of mailing of a Notice of Reassessment or confirmation of an assessment No earlier than 90 days following the date of mailing of a Notice of Objection, if CRA has not responded to the Objection Collection of taxes owing: Generally, 10 years from the date of assessment. A collection action cannot generally be undertaken until 90 days after the related Notice of Assessment or Reassessment has been mailed. Where a Notice of Objection has been filed, or an appeal has been made to the Tax Court, collection of the tax debt will be suspended until the dispute is finalized. Filing Deadlines: Final Returns of Deceased Taxpayers: Where the individual (unless self-employed or the spouse of a self-employed taxpayer) dies before October, April 30 Where the individual dies after September, 6 months following death Where the individual is self-employed or the spouse of a self-employed individual, the later of June 15 and six months following death The due date for the surviving spouse is the same as the due date for the deceased taxpayer To defer payment of income tax by making up to 10 equal consecutive annual payments: first instalment must be paid on or before the day on which payment of tax was otherwise payable. Filing Deadlines: Trust Returns March 31 for inter vivos trusts No later than 12 months following death for testamentary trusts, and annually thereafter Filing Deadlines: Corporations: 6 months following the end of the taxation year Instalment Payments: Corporations: On or before the last day of each month Objection to a Notice of Assessment or Reassessment: Generally, 90 days from the date of mailing of the Notice Individuals and testamentary trusts can file within one year of the due date of the related return Record retention, Individuals: Generally, six years from the end of related taxation year. Record retention, Corporations: Permanent corporate records must be retained for two years following dissolution. Registered investments: Manage registered investment accounts around these milestones: Contributions, RRSP: During the calendar year or within 60 days of the year end Deduction, Refund of Unused RRSP Contributions: Form T746, with tax return filed for the year in which amounts were withdrawn. Refunds from the CRA: Generally, three years from the end of the related taxation year. However, individuals and testamentary trusts can apply for refunds for up to ten years following the end of the related taxation year. Where the application for a refund reflects a loss carryback, the application period is generally extended to six years, and to seven years for corporations that are not Canadian controlled private corporations. Refunds, Overdeducted CPP or EI Premiums: File separate from PD24 for each worker with T4 information return within the following time limits: CPP Contributions: no later than 4 years from end of year in which overpayment occurred EI Premiums: no later than 3 years from end of year in which overpayment occurred For more tax saving ideas, order Evelyn Jacks' Essential Tax Facts 2010 Edition.   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.

The Knowledge Bureau and the Association of Professional Accounting and Tax Consultants (APATC) are pleased to announce their strategic educational alliance which will bring professional development opportunities to APATC members through certificate courses leading to the prestigious Distinguished Financial Advisor (DFA) and Master Financial Advisor (MFA) designations in specialized studies including tax, retirement, investment and business services. "We are delighted to work more closely with APATC members on their educational needs and look forward to their participation in Distinguished Advisor Workshops, Distinguished Advisor Conferences and the certificate self study programs offered by The Knowledge Bureau,î says Evelyn Jacks, President of The Knowledge Bureau. "These programs are ideal for in-office team training in advance of the busy tax season as well as tax efficient business succession and retirement planning at the highest national standards.î David Jex, Executive Director of the Association of Professional Accounting and Tax Consultants, responded by saying "We are excited to be working with a respected organization like The Knowledge Bureau. This partnership will provide a wealth of educational opportunities for our members. At the same time, our organization offers the students and graduates of The Knowledge Bureau all the benefits of joining a professional organization for accounting and tax practitioners such as representation to government, networking with fellow practitioners and participation in our Errors and Omissions Insurance Group Plan.î Members of APATC can begin their learning experiences with a complimentary subscription to The Knowledge Bureau's national e-newsletter, Knowledge Bureau Report. "KBRî brings up-to-the-minute interpretive news reports on legislation and industry changes that affect daily business matters of interest to tax and accounting professionals. Summer School opportunities are also available on a 24/7 access basis for individual practitioners and in-office study groups. Students and graduates of The Knowledge Bureau can apply for membership in the APATC by contacting admin1@apatcinc.com or by completing the application at http://www.apatcinc.com/. The normal application fee of $30 plus GST/HST will be waived. ABOUT THE KNOWLEDGE BUREAU The Knowledge Bureau is a national designated education institute and publisher, which provides excellence in financial education to tax and financial advisors and their clients. The Knowledge Bureau's programs lead to certification and designation at a post-secondary level, as well as CE accreditation by most regulators and professional associations. For more information, please visit http://www.knowledgebureau.com/ or call 1-866-953-4769. ABOUT THE ASSOCIATION OF PROFESSIONAL ACCOUNTING AND TAX CONSULTANTS: The APATC is a national not-for-profit organization representing self-employed practitioners in the fields of accounting, bookkeeping and tax. Formed in 1982, the organization has been providing members with such benefits as information seminars on advanced tax and accounting issues, building and marketing a practice, and hiring and developing a professional staff. The APATC's Errors and Omissions Insurance Group Plan is among the most comprehensive available for non-designated practitioners. The Association also represents their members as an advocate with various levels of government.