Tax Tip: The More Obscure Medical Expenses

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

Statistics Canada released two studies in April that point to a need for a different approach to financial planning for dual earning couples in Canada and, in particular, for highly educated working women, who have recently closed the earnings gap with their male counterparts. Advisors in the know about needs of this constituency have a great opportunity to win trust and provide ongoing service to this demographic. According to the study entitled Hours and Earnings Of Dual-Earner Couples released on April 24, 2009, the gap has been closing on the difference in earnings and working hours of Canadian husbands and wives. From 1997 to 2008, the average weekly hours worked by wives increased steadily, while during the same period, husbands were putting in fewer hours on the job. At the same time, women's average weekly earnings increased at a faster pace, although most dual earner wives still contributed less than half of the total family income. Education is one of the reasons for the closing of the earnings gap. The National Graduate Survey, published on April 22, noted ìshowed differences in terms of earnings from one level of education to another. The largest earnings gap existed between the bachelor's and master's levels, suggesting that investing in further postgraduate work is financially beneficial.î The survey also showed that the employment rate among master's graduates remained stable for men at 94%, while it rose for women, from 89% in 2002 to 92% in 2007. Consequently, among graduates with a master's degree, the gap in employment rates between women and men nearly closed. Further, a higher proportion of graduates of master's programs were working full time in 2007, compared with college, bachelor's or doctorate graduates.  A link to the study is available here.    These statistics tell an interesting story of the ìideal clientî for investment and retirement planning services. Financial advisors will in fact be planning for two retirements and tapping income and capital from multiple public and private pension accumulations as well as a variety of capital accounts from each member of a dual income family. High levels of education and experience will lend to a different relationship, as clients will demand more information and involvement in decision-making. This changed reality requires a different approach, new processes for specialized retirement and investment planning services, and leadership in preparation of a support team to assist with providing services to these new clients. Leadership and Opportunity in Turbulent Times, the theme of this year's Distinguished Advisor Conference broaches these new demographic issues with experienced advisors at this year's event, being held November 8-11 in Tucson, Arizona. In fact, the roster of speakers on the substantive agenda are reflective of a new guard of leaders in financial services as well, featuring a number of high profile women: Lisa Langley, Executive Director, International Money Management Institute covers Compliance Issues in Managing Wealth  Nicola Elkins provides insight into Mastering Your Philanthropy Robin Taub, CA and Wayne Cadogan, Regional Director, Investor's Group offer a male-female discussion of Character-Based Leadership Kerry Breeze, Publicist, tells us how to Blog, Twitter and Tweet Your Way to Success   Evelyn Jacks, President, The Knowledge Bureau will speak on the discipline of team-based Real Wealth Management For more information and to see the full conference agenda, visit the Knowledge Bureau's website at www.knowledgebureau.com/DAC.

The Canada Revenue Agency is scrutinizing eBay "PowerSellers", those who sell more than $3,000 a year on the site, to determine if they are reporting the full amount of revenues earned from the activities. Federal tax officials are expanding their review to users of eBay Canada to determine whether more than 10,000 sellers have included these revenues when they filed their income tax returns. The probe was launched approximately two years ago by the Canada Revenue Agency and initially focused on all eBay Canada PowerSellers in 2004 and 2005. The agency recently told eBay Canada it plans to expand the investigation to include all PowerSellers in 2006 and 2007 as well, putting several thousand more people under review. The CRA's investigation hit roadblocks with eBay Canada because they were allegedly refusing to turn over information about PowerSellers. Accordingly to eBay Canada officials, the information was stored on parent eBay Inc.'s computers in the U.S. and were therefore not within the CRA's jurisdiction.  They also felt the investigation was too broad and could be viewed as a "fishing expedition."   The Federal Court of Appeal dismissed eBay's arguments once the case was before them. The court ruled that e-Bay Canada has access to the records "with the click of a mouse," therefore putting them within the CRA's reach.  PowerSellers personal information such as names, addresses and gross sales revenues was ordered to be provided to the CRA, and the company advised it would comply with the decision.   Many of the PowerSellers affected by the court's decision feel the CRA's review is unfair as the sales on e-Bay Canada's site weren't run as a business, and the records they are requesting are not available.  The lesson in all this should be to keep your business records in order, as you never know when the tax man will come knocking at your door.   For more information on audit proofing your affairs and knowing the compliance requirements for both business and personal tax, subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.

Budget 2009 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. Application for withdrawal of RRSP amounts is made on Form T1036 Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP. The CRA has released an updated Form 1036, 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 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. Disabled Persons For HBP purposes, a disabled person is an individual who qualifies for the disability amount or a person related by blood, marriage, or adoption to a person who is eligible to claim the disability amount for the year of the HBP withdrawal. Disabled persons need not be first-time homebuyers to participate in the HBP. Qualifying Homes A qualifying home is a housing unit located in Canada. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings, all qualify. A share in a co-operative housing corporation that entitles the taxpayer to possess, and gives the taxpayer an equity interest in, a housing unit located in Canada also qualifies. Cancelling Participation If the taxpayer receives the funds from the RRSP but does not buy or build the home (and does not buy or build a replacement home), they may cancel their participation in the plan by contributing the funds back into the RRSP and notifying CRA of the cancellation. CRA provides a form in the Home Buyers' Plan Guide for this purpose. Any amount not recontributed to the RRSP will be considered income in the year received. Filing Requirements Members of the Home Buyers' Plan must file a tax return each year until their HBP balance is zero, regardless of whether they are otherwise required to file. Once payments begin, the taxpayer must report on Schedule 7 RRSP Unused Contributions, Transfers, and HBP or LLP Activities each year the amount of RRSP contributions designated as a repayment under the Home Buyers' Plan. These contributions are not considered to be an RRSP contribution and therefore do not require RRSP contribution room and are not deductible. If no contribution is made or the contributions are not designated as a HBP repayment, then the required repayment for the year will be included in the taxpayer's income on line 129. After the end of the year that the taxpayer turns 71, repayments can no longer be made to the HBP because the taxpayer may no longer contribute to his RRSP. Thus, in the year the taxpayer turns 71, if there is an outstanding HBP balance, the taxpayer must elect to pay the outstanding balance or include in income each year the required annual repayment. Emigration If a HBP participant becomes a non-resident, the outstanding balance must be repaid before the return for the year of emigration is filed but no later than 60 days after becoming a non-resident. Death of Participant In the year of death, the full outstanding amount under the Home Buyers' Plan must be repaid (or included in income of the taxpayer) unless, at the time of death, the taxpayer had a spouse or common-law partner and that individual elects (under S. 146.01(7)) jointly with the deceased's legal representative (often the same person) to make the payments under the Home Buyers' Plan and have the income inclusion not apply to the deceased taxpayer. This election may be made in the form of a letter attached to the deceased taxpayer's final return. If the election is made, the balance transferred must be repaid over the same period that applied to the deceased unless the survivor is also a participant under the HBP. If the survivor is a participant, the transferred amount must be repaid over the same period as the survivor's other HBP balance. 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.

The CRA has announced a filing extension for EFilers having difficulty SENDING or CORRECTING EFILE returns.  EFilers have until midnight Pacific Time on Wednesday, May 6, 2009 to transmit or retransmit them.  The returns will be considered as filed on time.   Most Canadians must file their tax returns by midnight April 30 or risk penalties and interest if they owe money to CRA. Proprietors may take until midnight June 15 to file, however, interest will be charged on outstanding balances as of May 1. For detailed explanations on penalties, prescribed interest rates, offences, audit-proofing, avoiding collection procedures, and voluntary disclosure, see EverGreen Explanatory Notes and the article below on Record Retention requirements.

The Federal Minister of Finance, The Honourable Jim Flaherty, has released a consultation paper requesting the views of Canadians on the subject of allowing banks and other federally regulated financial institutions to be a provider of leases for vehicles and other household properties. Due to the recent market meltdowns and the general economic downturn since 2007, the financing alternatives available for Canadians, from both a personal and professional standpoint, have diminished tremendously. This financing shortage was addressed by the 2009 Budget when the support of the Canadian Secured Credit Facility (CSCF) was announced. The CSCF will support up to $12 billion in asset backed securities which will be backed by loans and leases of both vehicles and equipment. Consideration must also be given to an ongoing supply of stable and diverse financing options for both consumers and businesses. The Government of Canada advised they would be approaching market participants to get their opinions on the merits of changing the rules regarding leasing by federally regulated institutions. In recent years in Canada, leasing agreements associated with vehicle sales have represented a large part of the market. In some years, vehicle lease sales represented up to half of all annual sales, but in late 2008 the number of leases dropped to around 20%. Lease and loan financing opportunities are increasingly hard for consumers and businesses alike to obtain from conventional sources, due to restrictions in funding in the marketplace. Federally regulated financial institutions are currently able to offer leases for personal property, with the exception of vehicles weighing less than 21 tonnes and personal household property. The consultations to be held by the Government will look to other sources for providing lease financing of these items. Some of the questions to be addressed in the consultations are: How do you view the role and prospects of lease financing of vehicles in the coming years? Are the existing restrictions on regulated financial institutions with regard to lease financing appropriate in the future financing environment? If not, how should these restrictions be amended to support broad access to financing in a stable environment? Does financial leasing of vehicles and personal household property pose risks to financial institutions? If so, how can those risks be managed? To read the entire consultation proposal, link to the Department of Finance news release here. We would like to hear your thoughts on the possibility of banks getting involved with lease financing to consumers and businesses for vehicles and household properties.   Please answer our poll question below to give us your opinion and viewpoints on this subject. Let us know what you are thinking about this change. Why is this occurring now, and is it good for the economy?

"This recession signals fundamental change for financial advisors" says industry expert and Knowledge Bureau faculty member, Jim Ruta. ìAdvisors who change their business model accordingly will prosper. Those who do not will become irrelevant.î "Those advisors who succumb to 'paradigm drag' and stick with their old ways despite the obvious necessity to change will have tremendous challenges in the post-recession marketplace. But, those who change appropriately will be the advisors of the future," said Ruta at the launch of his new book, "Master Your Money Management - How to manage the advisors who work for you", published by The Knowledge Bureau. Ruta is teaming up with internationally acclaimed life coach John Kanary to give advisors the tools to change their business and prosper as a "Post-Recession Advisor" at their Million Dollar Training Camp, May 23rd and 24th, 2009 in Toronto, sponsored in part by The Knowledge Bureau. Kanary helps advisors overcome fear, frustration and failure to prosper in these "interesting times". Ruta reveals the ideal post-recession business model that has caught national media attention. Check out the Million Dollar Training Camp website or call 1.866.546.7882 today for more details, the full agenda, early bird and new advisor pricing.