Tax Tip: The More Obscure Medical Expenses

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

The Minister of Finance, The Honourable Jim Flaherty, has announced that consultations with Canadians will take place nationally in order that the country can be led into an economic recovery with the help of measures in the 2010 Federal Budget. Flaherty plans to continue with the implementation of measures introduced through the Economic Action Plan introduced in January 2009. Some of the items introduced under the Action Plan are: Income tax reductions put in place since April 2009 Increased child benefits beginning mid 2009 Availability of the Home Renovation Tax Credit of up to $1,350 for renovations completed by February 1, 2010 Increased Working Income Tax Benefits of up to $925 per individual or $1,680 per couple for low income Canadians to access Increased small business deduction Increased capital cost allowances for specific purchases such as computers Minister Flaherty advises "We would like to hear from Canadians on how best to implement the remaining stimulus measures in Canada's Economic Plan and to keep on track towards a stronger economic future.î The Government will be looking for answers to the following: To what level has your industry or community been impacted by measures provided by the Economic Action Plan? Do you have any suggestions for making the making the various programs more effective? Are there other steps that could be taken in order for the Canadian economy to remain competitive? Can you suggest a time period over which the Government can rebalance the budget? The Federal Government will be holding consultations with Canadians across the nation, and in addition individuals can go on-line and and submit their views by linking here. Educational Resource: For the latest budget information sign up now to Canada's leading  online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.

With the end of the year fast approaching, it is worthwhile to review changes that have occurred during 2009 that may impact you or your clients at tax filing time.   Following are recent tax changes specific to those who are employed. It is important to review various tax provisions available to employees in this year of change, as the economic downturn has led to numerous job losses, especially in the automotive, media and manufacturing sectors. EI Benefits. Begin by reviewing income benefits from Employment Insurance when you file your return, in tandem with the possibility of a related clawback of those benefits if you were a high income earner. One of the reasons for this is that all regular EI benefit entitlements were extended by five extra weeks by the January 27, 2009 budget. In addition, that budget increased the maximum benefit entitlement period to 50 weeks from 45 weeks. You will want to learn more about offsetting taxable amounts from this source as well as severance packages with Registered Retirement Savings Plan (RRSP) contributions, in advance of the RRSP contribution deadline of March 1. Canada Employment Credit. This credit is available to employees to offset employment expenses, and in 2009 the credit has been enhanced to $1,044. Wage Earner Protection Program. The government extended this program to cover severance and termination pay owed to workers of companies that declared bankruptcy. Employment Perks. Negotiating new employment contracts, or corporate owner-manager compensation planning should include a review of the taxation of perks and benefits, some of which have also been changed this year. Employees will be treated to new tax free perks of employment under the following circumstances: 1. Loyalty Programs (Frequent Flyer Points) Starting in 2009, the CRA will no longer require frequent flyer points earned while flying on ­business to be included in an employee's income, so long as three ­conditions exist: ï the points are not converted to cash, ï the arrangement is not an alternate form of remuneration, or ï the arrangement is not for tax avoidance purposes. Where an employer controls the points (e.g., a company credit card), the employer will continue to be required to report the fair market value of any benefits received by the employee as income on the employee's T4 slip when the points are redeemed. 2. Overtime Meals and Allowances Provided to Employees. Beginning with tax year 2009 no taxable benefit will arise if: ï the value of the meal or meal allowance provided to an employee is reasonable (a value of up to $17 will generally be considered ­reasonable), ï the employee works two or more hours of overtime right before or right after his or her scheduled hours of work, and ï the overtime is infrequent and occasional in nature; that is, less than three times a week. If overtime occurs on a frequent basis or becomes the norm, the CRA will consider the overtime meal allowances to be a taxable benefit in the category of additional remuneration. Join us in the next edition of Breaking Tax and Investment News for more tax changes that will impact employees.   Educational Resources:  Now is a good time to look at retirement income plans, family succession and estate plans in an attempt to better understand financial needs for a future which could certainly include tax increases on both income and capital.  To learn more consider the following Educational Resources available from The Knowledge Bureau:   <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" />  Tax Efficient Retirement Income Planning    Master Your Retirement       Master Your Taxes Tax Efficient Investment Income Planning                      Master Your Real Wealth      Master Your Investment in the Family Business    

It's time to start your tax planning for NEXT year! Employers should ensure they include a copy of the new TD1 forms to all employees with their year end pay cheques in order that the correct source deductions are deducted for 2010. Form TD1, Personal Tax Credits Return, is completed by employees and provided to their employers. The forms are used by the employer to determine the amount of federal and provincial or territorial tax that is to be deducted or withheld from the employee's employment income. Employees will normally complete a Federal TD1 plus a TD1 for the province or territory of employment. The Federal TD1 has been revised to include the increased non-refundable tax credits available to taxpayers at the end of the year. The basic personal amount and spousal amount have now been increased to $10,382 and the amount that may be claimed for every child born in 1993 or later will be $2,101. For a link to the CRA website and the updated Federal and Provincial TD1's click here. Form T1213 is to be completed by taxpayers when requesting reduced tax deductions at source for deductions or non-refundable tax credits that don't appear on Form TD1, Personal Tax Credits Return. For example, if there are registered retirement savings plan (RRSP) contributions being made outside of contributions made through your employer or there are support payments made and tax deductions at source should be lowered due to these deductions, it is appropriate for a taxpayer to use Form T1213 to request reduced tax deductions at source for the tax year. For a copy of Form T1213, click here. For more tax tips, purchase a copy of Essential Tax Facts written by The Knowledge Bureau's President, Evelyn Jacks, to learn how to ace your 2009 tax return and save money all year long. 

" People are getting older, and many will lose legal capacity. Make sure all of your clientsí- and their parentsí planning documents are in place. You will expand your market and grow your book - and make your clientsí lives much easier - by making this part of your regular client process."   David Christianson, speaking at the 2009 Distinguished Advisor Conference in Tucson, Arizona By David Christianson, BA, RFP, CFP, TEP The Need:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" />   The majority of advisorsí clients are boomers, whose parents are aging.  As well, many advisors have a clientele made up increasingly of older, retired people for whom estate planning issues are becoming more and more important.   The passing of an expected trillion dollars of estate assets over the next 20 years has been well documented.  What has been largely ignored, however, are the issues of incapacity and diminished capacity planning.  Few advisors have either a plan or experience in dealing with substitute decision makers (SDMs), and these parties ñ family members acting as attorneys or committees ñ may be similarly unprepared for their tasks.  They need the leadership and the help of advisors who are properly trained and prepared.   Two million Canadians are caring for older relatives and by 2031, one in four Canadians will be over the age of 65.   The Risk:   Failure to prepare properly for the incapacity of clients can have the following negative effects: Severe disruption and impairment to the lifestyle enjoyed by the client; Compromise to the level of care potentially available; Great stress for the family and often conflict between family members; Significant loss of assets under management for the advisor; Exposure to legal proceedings against SDM and/or advisor, if proper protocols are not followed. Join us in the next edition of Breaking Tax and Investment News for opportunities and processes to ensure a smooth transition for your clients with estate planning issues.   David Christianson is a Knowledge Bureau faculty member.

CRA has once again provided us with the lowest prescribed rates in recent history - a 1% rate for certain taxable benefits and loans has been in place since April 2009.  This is a great opportunity to use low-taxed corporate dollars to fund family income splitting, the purchase of new vehicles, new investments or to fund employer-required moves. Advisors should also consider speaking to their clients about opportunities for inter-spousal and shareholder loans with the low rates in effect.   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 corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from January 1, 2010, to March 31, 2010 and have remained unchanged since April 1, 2009. 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 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 GST 5% 3% HST 5% 3% Air Travellers Security Charge 5% 3% Excise Tax (non GST) 5% 3% Excise Duty (except Brewer Licensees) 5% 3% Excise Duty (Brewer Licensees) 3% N/A Softwood Lumber Products Export Charge 5% 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.  

"An opportunity exists to blend the unique benefits of a family business with the strengths of a market driven business, providing the basis for greater wealth creation for the family over a longer period of time."   Jenifer Bartman, speaking at the 2009 Distinguished Advisor Conference in Tucson, Arizona By Jenifer Bartman, CA, CMC   Small to medium sized businesses make up a significant portion of Canada's business community and account for a large portion of the country's economic activity. Most people either know someone who runs a business, owns a business, or may be a business owner themselves. People may be employed by a business that is owned and/or managed by an independent group of parties, or perhaps it is owned by an individual or family. Sometimes businesses start off as closely held family businesses that later become more widely held, perhaps by parties including the original owners, or even by parties independent of the founder. Some businesses stay small; some grow moderately, while others grow to become very large businesses, even with operations spanning a number of countries. Some businesses operate for a period of time, experience moderate growth, and then fade into decline. Others, sadly, are wound up and no longer exist, often when the owner retires. Performance, profitability, and value can vary significantly from business to business, with some companies being sought after by customers, partners, and potential acquirers. Others go virtually unnoticed. Why do some businesses become the recognized name or ìprovider of choiceî within their industry, while others fall to ìcommodityî status? Why do some companies remain strong throughout the years, perhaps even over generations, while others flounder when the original driving forces behind the business are no longer involved? Consider the following: Some family businesses exist solely to meet the economic needs of the family unit. The founder generates business within his or her network and does not have any significant initiative to grow beyond this point, so long as the family's economic needs are met. This type of business can be referred to as a Lifestyle Family Business. Some family businesses are opportunity driven, in that the founder wishes to identify unmet needs or areas of potential within the marketplace and seek to position the business to meet and benefit from these needs. The founder is motivated to grow the business beyond the current economic needs of the family and may be driven by factors other than basic economic need, such as being the best provider in their industry. This type of business can be referred to as a Market Driven Family Business. Many family business leaders have never considered their business in this context, including the risks and rewards associated with each category. The challenge is attaining Market Driven Family Business status, and understanding what is required to successfully operate at this level. Jenifer Bartman is a Knowledge Bureau faculty member and is a co-author of MASTER Your Investment in the Family Business ñ How to Increase After-Tax Wealth.