Tax Tip: The More Obscure Medical Expenses

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

Respected author and investment guru Gordon Pape  is no "gold bugî but, he says, now is the time to buy gold. That's because Pape, a keynote speaker at the upcoming Distinguished Advisor Conference, believes the U.S. Federal Reserve's third "quantitative easingî (QE) is bad news for investors. "It suggests the economy is in worse shape than we thought,î says Pape, the author of more than 20 books as well as the editor and publisher of the Internet Wealth Builder. "The Fed says QE3 is about job creation but it is more involved than that. The economic numbers are telling them something ó and the numbers are worse than they thought.î In mid-September, in the midst of a hard-fought U.S. presidential election campaign, the Fed announced its plan to purchase agency mortgage-backed securities at the rate of US$40 billion a month for an indefinite period of time. As well, the Fed decided to keep the target range for the federal funds rate at 0% to 0.25%, at least through mid-2015, an extension of its earlier deadline of mid-2013. "The fact the Fed decided it had to act now,î says Pape, "suggests the situation is deteriorating at a rate that would make further delay a dangerous gamble.î There are other reasons QE3 causes Pape concern. First off, it is inflationary. Commodities are priced in U.S dollars which means it will take more US$ to buy a barrel of oil, an ounce of gold, a pound of copper or a bushel of wheat. He admits that good news for Canada's resources sector ó but bad news for consumers. "Gold is the prime beneficiary,î Pape says. "If you don't own gold, you should. It's a good insurance policy.î The Feds open-ended commitment to print money will also devalue the US$ and put upward pressure on the Canadian dollar, making it difficult for Canadian exporters, who are already feeling the impact of sluggish trading partners. Finally, the Fed move ties the hands of Bank of Canada Governor Mark Carney, who has repeatedly indicated that he thinks the time to raise interest rates is drawing near. But if Canadian rates move too much out of step with U.S. rates, it will be one more factor pushing the C$ higher. "Carney is hamstrung,î says Pape. That makes the theme of this year's Distinguished Advisor Conference ó "Navigation: Charting a New Courseî ó particularly apropos. Pape will address the annual conference, held this year in Naples, Fla., from Nov. 11 to 14, on Monday, Nov. 12; he'll talk about how advisors can develop profitable investment strategies for their clients in what is essentially a stagnant economy. "I'm not a pessimist by nature,î says Pape, "but I am cautious. We have to face reality ó and continue to adopt a defensive strategy.î Early registration deadline for the conference is Sept. 30.  

Fall is in the air and you know what that means: yearend tax-planning and tax-filing time is just around the corner. It's time to get a handle on recent changes to tax laws and their impact on your income. That means it's also time find a tax professional who meets your needs and becomes part of the team of professionals who advise you. But finding the right tax professional ó someone to whom you can turn when an important life event triggers crucial financial decisions ó can seem like a difficult task. Often, you simply don't know what questions to ask, or if you are receiving the right answers for your situations. You can start by asking yourself three questions: What are your top three concerns about your taxes? What are your top three concerns about your investments? What are your top three concerns about your family financial affairs? Once you have identified these concerns, discuss them with the tax professional you are interviewing. Then, use this checklist as your interview guide: 1. Has the professional answered your concerns in plain English? 2. Would you consider this person a "financial educatorî? 3. How does this professional price his or her services? 4. Are these services available to you year round? 5. Does the professional have a "successionî team, juniors he or she is mentoring so you can get service when your professional is on vacation or is ill? 6. Are services guaranteed? What happens if there is an error or omission that costs you interest, penalties or causes you to lose money? 7. Can the professional provide you with three references from professionals who have worked with him or her? 8. Can the professional provide you with three references from clients who have worked with him or her? 9. When is the last time this person took a refresher course? Look for certificates from reputable educational programs. There are thousands of professionals who have Knowledge Bureau certification and designations ó the Master Financial Advisor (MFA) or the Distinguished Financial Advisor (DFA) - Tax Services Specialist ó who are trained to work with you and become part of your inter-disciplinary team. You may wish to seek out local MFAs and/or DFAs and interview them. They are people who you know will be up to date. Every fall, Knowledge Bureau faculty travel across Canada bringing new educational programming to these savvy professionals, so they can update their knowledge for yearend tax-planning opportunities. We also delve into issues involving specialized expertise; this November, we'll discuss cross-border taxation with our special guest, Angela Preteau, CA, CPA. You may wish to join us. It's Your Money. Your Life. At Knowledge Bureau, we strongly recommend that you work with a team of advisors who come from various disciplines, who can assist with a strategic solution when you have important decisions to make. Make sure you deal with competent professionals who can be your financial educator, advocate and steward of your hard-earned money. Evelyn Jacks is president of Knowledge Bureau, which offers bookkeeping and income tax preparation courses within its curriculum. You can also offer financial education books to your clients or other family members. For more information, click here.   Additional educational resources: Cross Border Taxation Course and Distinguished Advisor Workshop.  

In this second of a two-part series, Ottawa Personal Financial Organizer Patricia Cocker tells you how to put your life in order so you'll be ready for the end of life. (For Part 1, click here.)   Losing a loved one is tough. You think all you have to do is get through the funeral, then you will have the time you need to come to terms with your loss. But if you are the executor, nothing could be further from the truth. It is only the beginning. Unfortunately, the executor is often the spouse or another family member. Although this person may respect the deceased's wishes, he or she generally has little experience with government rules and regulations, never mind the paperwork that needs to be completed. The funeral home may provide some information ó a package detailing the necessary letters of notification, application forms for Canada Pension Plan (CPP) benefits, proof of death ó but there is a great deal more to be done! ï Cash flow. Your first responsibility as executor will be to ensure that there is sufficient cash flow to support those who are financially dependent upon the deceased. Here, it is wise to consult a professional. ï Paperwork. With any luck, the deceased will have prepared an itemized list of assets and liabilities for you. If not, review the previous year's income tax return to determine sources of income, eg. salary, pension, investments, etc. You will need to notify the following, where applicable, of the deceased's death: Employer, pension offices. Ask if there are any benefits available to survivors or the estate; CPP. Apply for death benefit, survivor/orphan benefits; Service Canada, which administers the Old-Age Security program; Veterans Affairs Canada, which administers veterans' pensions and benefits; Financial services companies including banks, credit unions, mutual fund companies and brokerage firms. Ask if there are any insurance benefits available for survivor/estate from any of these accounts; Credit card companies and other financial institutions with which there exists a liability. You must return credit cards or cut them in pieces and pay any outstanding balances. Likewise, ask if there is a death benefit attached. Also, it is important to return the deceased's government-issued cards, including social insurance card, provincial health card, passport, motor vehicle licence and driver's licence. Finally, to prevent identity theft, notify the Canada Revenue Agency (CRA, as well as the Office of Vital Statistics in deceased's place of birth if it is in not in the province of his or her death. It is also wise to inform credit tracking agencies such as Equifax and TransUnion Canada. ï Insurance. Next, if the deceased had life insurance, complete the applications for benefits. If you are not sure, contact the Canadian Life and Health Insurance Ombudservice. ï Legal. Meet with the deceased's legal representative to determine whether probate is required. Note that probate validates the will and formally appoints the executor. Financial institutions may require probate before releasing any funds. ï Sell or transfer assets. If the deceased had real estate, stocks, bonds and or mutual funds, as the executor you will need to sell or transfer ownership of these assets. That requires working with the appropriate individuals or institutions as well as consulting the appropriate professional. As well, you will need to: close the deceased's safety deposit box, close bank accounts, pay debts, settle creditor claims. ï Income taxes. People often think that with death, the responsibility to file income tax returns and pay outstanding taxes ends. Not true! All prior years' returns, as well as a return for the year of death, must be filed and any taxes owing must be paid. Depending on the estate, you may need to file a return for the estate as well. Once you have received assessments for all returns, you can complete the application for "Clearance Certificate,î confirming with the CRA that it has no further interest in the deceased's affairs. Failure to do so may result in the CRA coming back at a later date for more money ó with the executor being liable. The final duty is to distribute the assets to beneficiaries. The executor may collect executor fees and be reimbursed for legitimate reasonable out-of-pocket expenses incurred during the process. Thought for the day: Have you ever heard anyone who has acted as executor say, "Gee that was fun. I want to do it again!î? Patricia Cocker, B.A., CFP, is a Certified Professional Consultant on Aging and a qualified Credit Counsellor who helps clients organize their financial paperwork in four areas: money management, income tax preparation, financial records management and after-funeral care.   Additional Educational Resource: MFA - Succession and Estate Planning Specialist Designation.  

Never forget that the Canada Revenue Agency (CRA) doesn't tolerate tax evasion, and it has the power to do something about it. A recent case in point: a Quebec company, Disco-Spec Dagobert Inc., was fined $439,527 for tax evasion. This amount represents 100% of the taxes that the company sought to evade. Additionally, the company will have to pay the full amount of the taxes owing, plus related interest and penalties that have accrued. The CRA investigation revealed that Disco-Spec voluntarily contravened the Income Tax Act throughout the period 2007-2010 by reducing its taxable income by a total of $2.5 million using various methods. The company also claimed false deductions.   Additional Educational Resource: EverGreen Explanatory Notes  

Each year, Paul Dubé, Canada's Taxpayers' Ombudsman, tells us, the Canada Revenue Agency (CRA) processes some 34-million payments from Canadian taxpayers. As well, Canadian taxpayers often have multiple accounts: personal income tax accounts, corporate accounts and GST/HST accounts. Errors happen ó and taxpayers spend hours and dollars trying to make things right with the CRA. They also complain to the Office of the Taxpayers' Ombudsman, which has resulted in the recent release of Dubé's special report, entitled Getting it Right: Investigation of service and fairness issues arising from the misallocation of payments by the Canada Revenue Agency. Although Dubé did find the CRA was often at fault, generally due to keying errors, he also found taxpayers had their own issues, particularly when it came to sending cheques as payments to the CRA. So, what can you do to smooth the process? The types of errors the report found include: unclear or illegible handwriting; payments with incorrect information or without the proper remittance vouchers provided by the CRA; omission of identifying information such as a business number or social insurance number; issues with date transference. For example, does 11-06-2009 mean June 11, 2009, or November 6, 2009? Remittance vouchers are a particular problem, says the report. "Remittance vouchers are pre-printed with magnetic ink,î the report tells us, "which allows the information they contain to be read by a computer through the use of Optical Character Recognition (OCR) scanning technology.î The idea is that these vouchers will facilitate efficient processing and allocation of payments. But problems occur when taxpayers reproduce or photocopy the vouchers. "The OCR scanning technology will not recognize the ordinary inks used by photocopiers and standard printers.î Despite various warnings, the CRA still receives payments accompanied by photocopied vouchers that cannot be scanned electronically. But Dubé still holds the CRA accountable. In Getting it Right, Dubé makes three recommendations: ï The CRA reviews its standards and procedures for processing payments to ensure that CRA employees are afforded sufficient time to perform their duties accurately and thoroughly. ï The CRA determines the optimal remittance batch limit for the most efficient detection of processing errors. ï The CRA educates taxpayers on how to avoid making remittance errors as well as how to have them corrected when they do occur. "Both the CRA and the taxpayer play a part in misallocated payments,î he concludes. "The CRA, however, is responsible for providing the tools to assist taxpayers in fulfilling their obligations under Canada's self-assessment tax system. Therefore, regardless of who makes the error, the CRA must ensure that its communications to taxpayers are clear and appropriate.   Additional Education Resources: DFA - Tax Services Specialist and Distinguished Advisor Workshops.  

"In Canada and other Organisation for Economic Co-operation and Development (OECD) countries,î reports Statistics Canada's Education Indicators in Canada: An International Perspective, 2012, "it is evident that employment prospects increase with educational attainment.î And it would seem Canadians are well educated and becoming better educated all the time. According to the pan-Canadian report ó the fourth of a series that applies international standards ó the proportion of Canadians aged 25 to 64 with the equivalent of college and university completion increased to 51% in 2010 from 40% in 2000. At the same time, the number of those 25 to 64 who did not complete high school decreased to 12% in 2010 from 19% in 2000. Break it down even further, in 2010, 92% of Canadian aged 25 to 34 had completed at least a high school education, compared with 82% for those aged 55 to 64 "reflecting change in attainment patterns.î These rates were higher than the average for the 34 OECD-member countries. As you might expect, the employment rate tracks higher for those with higher education. In 2010, reports Education Indicators in Canada, Canada's employment rate for adults aged 25 to 64 who had competed college diploma and certificate programs was 81% and for those who had completed university and advanced degrees was 82%. By comparison, the employment rate for those Canadians aged 25 to 64 who not completed high school was 55%. For upper secondary graduates, the employment rate was 72%. Certainly, in terms of spending on education, Canada is no different than other OECD countries. "With 6.1% of its GDP allocated to educational institutions in 2008,î says the report, "Canada devoted about the same share of its wealth as the OECD countries on average (6.2%).î Where Canada differs is on the relative portion of money that goes toward "tertiaryî education vs primary and secondary. Says the report: "In 2008, 40.2% (2.5% of 6.1%) of the share of GDP that Canada invested in education was allocated to the tertiary sector. Among the OECD countries, Canada, along with the United States (36%) and Chile (35.8%), allocated the largest share of education spending to tertiary education.î Certainly on the basis of educational institutions' expenditures per student, post-secondary education gets the largest share of financial resources in Canada. In 2008-09 fiscal year, expenditures per primary school student was $10,758; for a secondary school student, $11,489; and, for a university-equivalent student, $31,103. Another interesting difference, the report points out, for primary and secondary education, the compensation of staff ó particularly teachers ó accounted for the largest proportion of expenditures at 77.4% and 62.4%, respectively. At the tertiary level, staff compensation ate up 63.1% of expenditures and teacher compensation 36.2%. Capital expenditure ó that is spending on the construction, renovation and major repair of buildings ó accounted for 10.5% of tertiary-education expenditures, vs 9% for the OECD and 7.2% for primary and secondary. Do you think Canadian universities spend too much on capital expenditures to the detriment of accessible tuition fees? See this month's poll