Tax Tip: The More Obscure Medical Expenses

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

An experienced advisor in the industry seemed to hit it on the head when he declared May 1st as the start of the next phase of tax season ó adjustment and audit season! 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! 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! 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 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 Canada Revenue Agency (CRA) has announced some additional features added to the Represent a Client Service.   When registering with the service or updating information regarding a client, the option for providing an e-mail address is now available.  The CRA will be using the e-mail address to provide information on upcoming events, future enhancements or possible service interruptions.  It should be noted that the CRA will not be utilizing e-mail to contact representatives or businesses for tax related information.   In addition, a Client Summary feature has been added to the representatives screen of My Account, which will allow them to view a list of accessible information such as: account balances and instalment details assessment/reassessment details registered retirement savings plan/Home Buyers' Plan/Lifelong Learning Plan information disability details carryover amounts Another upgraded feature is providing the ability to tax preparation and payroll service businesses to create groups of representatives within the Represent a Client service. This will allow large tax service and payroll businesses to separate groupings of clients or businesses into more manageable sizes.

By Evelyn Jacks, President, The Knowledge Bureau Provincial budgets coming down in difficult times make the job of Finance Minister even more interesting. The question of how to build successful new economies is often the most difficult one moving forward. The federal government posted a paper on the issue before the financial crisis. Entitled Advantage Canada [1] the paper boldly pronounced that the modern world economy has changed and that from Canada's perspective, the new ground rules for success can be summarized in three core, fundamental truths: People and capital are mobile. Talented, creative people are the most critical asset to a successful national economy. A favourable business environment is essential to retaining, attracting and growing high-quality, innovative enterprises and encouraging them to compete with the very best. According to this document, the fundamental determinants of long-term economic growth in developed countries are: A skilled and highly educated workforce. High rates of private and public investment in research and innovation. Modern infrastructure. High rates of business investment in machinery and equipment. In turn, private investments in these key determinants of growth are encouraged by: Low public debt and low and stable inflation. Low taxes on work, savings and business investment. A high-quality and accessible education system. A competitive business environment, including effective regulation and competition policies. Stability and efficiency in the financial system. Openness to trade and investment. Flexible labour markets. Finally, the paper suggests that there are barriers and challenges to address if we are to improve our quality of life and become a world leader for today and future generations. These barriers and challenges include: High taxes that are discouraging investment and initiative. Income taxes on individuals and businesses in Canada remain high by international standards. Personal and corporate income taxes as a percentage of GDP are higher in Canada than in all other G7 countries. Business investment in equipment, innovation and training. Businesses in other OECD countries are investing on average more in research and development, and machinery and equipment than do our businesses. Participation in workplace training is also higher in other leading OECD countries. The need for skilled labour. There are shortages of skilled labour in a number of provinces and territories. These shortages are particularly acute in Alberta and Saskatchewan, where more than one-quarter of manufacturers report that labour scarcity is limiting operations. Now, your turn. What are your thoughts?   [1] Department of Finance Canada

The Minister of National Revenue and Minister of State (Agriculture) have provided taxpayers affected by flooding in Manitoba an opportunity to extend the deadline for filing their tax returns from April 30, 2009 to June 1, 2009.   The Honourable Jean-Pierre Blackburn announced that "the Government of Canada understands that taxpayers in Manitoba have encountered great difficulties during the flooding and we know that people are primarily concerned with protecting their homes and communities from damage and as a result may not be able to file their personal income tax returns on time."   For those unable to file their returns by June 1, 2009, a written request should be submitted using Form RC4288 Request for Taxpayer Relief by those taxpayers and businesses impacted by the flooding and are seeking an additional extension of the filing deadline for tax returns.    The form can be accessed by clicking here.

The CRA has released an updated guide for Past Service Pension Adjustments (Guide T4104) which contains general instructions and information for pension plan administrators to calculate past service pension adjustments (PSPA). These PSPA calculations may be required for employees that are being provided with new lifetime retirement benefits or when existing benefits are improved for members. The guide will provide information on the following: What is a PSPA How a PSPA arises How to calculate a PSPA How to report PSPA's Common situations and examples are provided in the guide to calculate figures needed for PSPA, benefit increases that may be excluded when calculating pension credits, the two methods for calculating the PSPA amounts and special rules that may impact multi-employer plans. This guide is important because the last time the CRA issued guidance on calculating PSPA's was in 1999, and the T4104 guide should be used to calculate PSPA's for any year until a new version is issued. To view the new T4104 guide, click here.    

In a previous edition of Breaking Tax and Investment News, we wrote about the tax advantages offered by the various provincial governments and how they rank, per the Alberta budget papers. Depending on your province of residence at December 31, 2009 and your income level, you could be paying a difference of anywhere from $4,400 to $9,800 in provincial taxes based on where you live. Here is a review of taxes you would be paying in the various provinces at income levels of $30,000, $75,000 and $125,000 with two children: Employment Income - $30,000 - One Income - Two Children Provincial Rank ProvincialIncome Tax ProvincialSales Tax Health CarePremium PayrollTax FuelTax Total 1. Quebec (4447) 1157 - 630 456 (2204) 2. Saskatchewan (3060) 596 - - 450 (2014) 3. Alberta (1301) - - - 270 (1031) 4. Ontario (423) 871 225 279 441 1393 5. BC 480 497 - - 435 1412 6. Manitoba 267 885 - 221 345 1718 7. NB 456 1196 - - 321 1973 8. NS 861 1124 - - 465 2450 9. PE 1066 1287 - - 435 2788 10. NL 1004 1202 - 173 495 2874 A lower income taxpayer living in Quebec would pay just over $5,000 less in provincial tax than if they lived in Newfoundland. Employment Income - $75,000 - Two Incomes - Two Children Provincial Rank ProvincialIncome Tax ProvincialSales Tax Health CarePremium PayrollTax FuelTax Total 1. Alberta 2,679 - - - 405 3,084 2. Saskatchewan 2,675 913 - - 675 4,263 3. BC 2,107 1,289 972 - 653 5,021 4. Ontario 2,480 1,643 563 698 662 6,046 5. NB 4,364 1,971 - - 482 6,817 6. Manitoba 4,520 1,446 - 554 518 7,038 7. Quebec 2,596 2,216 - 1,575 684 7,071 8. NS 4,522 1,869 - - 698 7,089 9. NL 3,889 2,032 - 433 743 7,097 10. PE 4,724 2,146 - - 653 7,523 A middle income family living in Alberta would pay approximately $4,400 less in provincial tax than if they lived in Prince Edward Island. Employment Income - $125,000 - Two Incomes - Two Children Provincial Rank ProvincialIncome Tax ProvincialSales Tax Health CarePremium PayrollTax FuelTax Total 1. Alberta 6,895 - - - 405 7,300 2. BC 5,209 1,980 972 - 653 8,814 3. Saskatchewan 7,834 1,364 - - 675 9,873 4. Ontario 6,196 2,498 788 1,163 662 11,307 5. NB 10,015 2,958 - - 482 13,455 6. NL 9,120 3,057 - 721 743 13,641 7. Manitoba 10,027 2,176 - 923 518 13,644 8. NS 10,725 2,788 - - 698 14,211 9. PE 10,331 3,230 - - 653 14,214 10. Quebec 10,628 3,191 - 2,625 684 17,128 A higher income family living in Alberta would pay $9,800 less in provincial tax than if they lived in Quebec. Therefore, depending on your family profile and income level, a careful review if you are contemplating a move in 2009 could make it very worthwhile from a tax standpoint.