Tax Tip: The More Obscure Medical Expenses

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

By Evelyn Jacks The March 4, 2010 Federal Budget delivered two interesting tax changes for investors and several more for executives who take advantage of stock option benefits. We'll take a look at the changes for investors in this article. Besides the scheduled increases in RRSP contribution room, there are specific changes for those who invest in RRSPs, RDSPs (Registered Disability Savings Plans) and RESPs (Registered Education Savings Plans). RRSP Maximum Contribution Room. Taxpayers can contribute 18% of their earned income to a maximum of $22,000 in 2010. This amounts to $1833.33 a month for those who qualify. However, the RRSP is also a great place to invest proceeds from inheritances or severance packages, too. The resulting deduction will reduce net income on the tax return, which is the number used to calculate refundable and non-refundable tax credits. Making that contribution can therefore save you tax dollars and increase social benefit payments as well. Tax Tip: Check out your available RRSP contribution room for tax year 2010 on your Notice of Assessment or Reassessment received with this year's tax filings. RRSP Rollovers to RDSPs (Registered Disability Savings Plans): As of March 5, 2010, the rollover rules for RRSP balances remaining at death are extended to allow for tax-free rollovers from the deceased taxpayer's RRSP to the RDSP of a surviving child or grandchild. Such rollovers are limited to the recipient's RDSP contribution room and will not generate a Canada Disability Savings Grant. However, such contributions will not be allowed until July 2011 to give the government and financial institutions time to adjust their systems to deal with such rollovers. Where the taxpayer died after 2007 and before March 5, 2010, transition rules will be put into place so taxpayers can avail themselves of similar rollovers. Tax Tip: Canada Disability Savings Grants are lucrative and can amount to a dollar match of 3-to-1 in some cases, depending on income level. Catch-Up of RDSP Grants and Bonds: Starting in 2011, contributors will be allowed to take advantage of a new 10 year carry forward of CESG and CDSB entitlements, (but starting with tax year 2008, the year RDSPs were first introduced).  These entitlements will be based on the beneficiary's income in those years.  Advisors should explore the opportunities with clients who wish to open an RDSP, and, over time, review the annual statements of CESG entitlements with planholders. When contributions are made to the plan, the CESG rate earned by those contributions will be paid as if the contributions were made in the year that the entitlements were earned. Where the entitlement will be paid at different rates, the grants will be calculated at the highest rate first. Tax Tip: Keep track of unclaimed grants and bonds for use in the future when more cash flow may be available. Evelyn Jacks is President of The Knowledge Bureau. For more information on Mastering Your Taxes and Your Personal Finances, go to www.knowledgebureau.com.   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.

With successive provincial budget announcements, governments are turning to the power of sales taxes to shore up revenues and enlist the help of business to collect those taxes for them. Nova Scotia, for example, announced a hike to their sales taxes in their recent provincial budget, while Ontario and British Columbia will be moving to a harmonized tax regime in July. Those working with business owner clients in the tax and bookkeeping field could benefit greatly from deeper and more formalized knowledge in the areas of personal, corporate and GST tax matters, to better assist their clients to emerge into this post-financial crisis reality. "Today more than ever, business owners need to count on their professional document managers to know the intricate details surrounding tax compliance in a changing world and how to handle increasingly complex business transactions,î says Evelyn Jacks, President of The Knowledge Bureau, "For these reasons we have updated courses and research tools available in the DFA, Bookkeeping Services Specialist Program, featuring EverGreen Explanatory Notes, and are introducing several new courses specific to the succession planning needs of business owners.î Consulting in the area will provide important opportunities to consolidate relationships with clients, and gain referrals for new business. However, it will be important for tax and bookkeeping professionals to be on top of the most cutting edge changes, warns Mrs. Jacks. ADDITIONAL EDUCATIONAL RESOURCES: EverGreen Explanatory Notes Basic Bookkeeping for Business Advanced Bookkeeping for Business Profiles

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 procrastinators, and as many as 20% of all personal tax returns are filed late.  June 15th is an important date as proprietorship tax returns are due then and quarterly instalments are also required. Failure to file will also cost you potentially large sums when you miss important planning opportunities. For example, tax form T1032 Joint Election to Split Pension Income must be filed by your tax filing due date (which for most people is April 30). This is a very lucrative income splitting opportunity for those receiving qualifying pension income and it would be a shame to miss the extra tax refunds due to tardy tax filing habit. Those advisors in the tax and financial services industry should be sure to call all clients who have not yet filed a return by April 30 to maximize availability of this type of provision and of course avoid late filing penalties. CRA should continue to be on the radar screen, however, with the upcoming tax filing deadline. Please be sure to diarize milestones that maximize your rights under the Income Tax Act: INCOME TAX DEADLINE MAXIMIZER WITHIN THE TAX FILING YEAR ENDING APRIL 30th March 31 T3 Slip Completion and Distribution Pension Adjustment Reversal Deadline Interest Penalty Due on RRSP Excess Contributions (T1-OVP Form) April 15th   April 30 U.S. Tax Filing Due Date   Tax Filing Deadline: Personal Tax Returns 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 30 days of receipt of the return after April 30) Tax Filing Deadline: Proprietorship Returns - T2125 Quarterly Instalment Due Date Closer Connection Exception Statement for Aliens (IRS Form 8840) June 30 Tax-Free Savings Account Returns due   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 September 15 Quarterly Instalment Payment Due December 15 Quarterly Instalment Payment Due December 31 Annual Instalment Due for Farmers, Fishers January 30 Requirement to pay interest on inter-spousal loans February 28 T4 Slip Completion and Distribution March 15 Quarterly Tax Instalment 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.

With housing prices on the rise across Canada and the appearance of increased interest rates on the horizon, there is no better time to consider purchasing a home and lock in those low rates. The Home Buyers' Plan and First Time Home Buyers' Tax Credit program may help fulfill those dreams.   As most of us are aware, the 2009 Federal budget increased the maximum amount that can be removed from a taxpayer's RRSP under the Home Buyers' Plan to $25,000 for withdrawals after January 27, 2009. An application for withdrawal of RRSP amounts is made on Form T1036 Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP, click here to access the form.   In the same budget a First Time Home Buyers' Tax Credit was introduced.  This credit is a non-refundable tax credit based on $5,000 for first time buyers who purchase a home after January 27, 2009 (closing date must be after that date). The credit is claimable in the year the home is acquired.  The credit translates to a $750 tax credit ($5,000 x 15%).   The Home Buyers' Plan allows first-time home buyers (or those who have not owned a home in the current year or preceding four years) to withdraw (under S. 146.01), on a tax-free basis, up to $25,000 (after January 27, 2009) of funds saved within their Registered Retirement Savings Plan (RRSP) for the purpose of buying or building a home. No tax will be withheld on such withdrawals. The withdrawals may be a single amount or the taxpayer may make a series of withdrawals throughout the year as long as the total does not exceed $25,000. Tax-free withdrawals from an RRSP may also be made for the purpose of making home renovations or purchasing a compatible home to meet the needs of a disabled person. The funds must be repaid back into the RRSP, over a period not exceeding 15 years, beginning in the second calendar year after the withdrawal. Amounts which are due and not repaid are included in the taxpayer's income under S. 56(1)(h.1) in the year they are due. The taxpayer and their spouse or common-law partner may each participate in the plan and together withdraw up to $50,000 after January 27, 2009 from their respective RRSPs. Excerpted from EverGreen Explanatory Notes. 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.

Most people know that April 30 is the tax filing deadline for individual taxpayers, and by now you should have received all of your slips, including T3's and T5's, to send to your tax preparer in order to finish the task. But the big question, in terms of maximizing all your benefits is this: What are you going to do with your tax refund?  Will you spend it or invest it? Here are six tax efficient ideas for building wealth with your tax refund: Pay off expensive, non-deductible debt, like credit card balances. (Then vow to budget and live within your means, saving first, before spending.) Save within a TFSAóthat's the new Tax Free Savings Account. It's a great place to park money and earn tax free investment income. Remember to file your return to build TFSA contribution room. If you have taxable income, invest in an RRSP. You will reap immediate tax savings in the double-digits, money you can then use for a TFSA contribution. If you have children, invest the money in an RESPóa Registered Education Savings Plan, and benefit from the Canada Education Savings Grant. If you have a disabled dependant, invest the money in an RDSPóa Registered Disability Savings Plan, and benefit from the grant and bond structures available here. Invest the money outside registered plans in your non-registered accounts, with a view to earning tax efficient income like dividends and capital gains. However, if you must consume frivolously, it will stimulate the economy! But, think about this as you do it: the trick to mastering your money is to take control of the first dollar you earn, hold on to it the longest through wise investment choices, and then, pass along the most to yourself in your retirement and your heirs at death. Evelyn Jacks is President of The Knowledge Bureau and author of Master Your Taxes, Make Sure It's Deductible and Essential Tax Facts. Readers may sign up for a free subscription to Knowledge Bureau Report at www.knowledgebureau.com.

The Federal Task Force on Financial Literacy has been travelling across Canada holding consultations with Canadians on the issues that matter most to them with respect to literacy issues and financial matters.  For those that missed the public sessions, comments are still welcome on their website at www.financialliteracyincanada.com.   The Task Force was formed to make recommendations to the Minister of Finance on a cohesive national strategy on financial literacy and they have a website with more information on the work they do and what they hope to accomplish.  The Task Force travels East next.  See the full list of public consultations by clicking here.   The objective is to recommend ways to improve financial literacy so Canadians are better able to make sound financial decisions in a world that is fast moving and very complex.   Evelyn Jacks, the founder and President of The Knowledge Bureau, is a member of the Task Force. Interested subscribers to the Knowledge Bureau Report may wish to follow the work of the Task Force. Stay tuned for more details on the consultations as the Task Force continues its way across Canada.