Box 85 on T4 should be mandatory and your employer will save!!

In mid May this year, a student taking the Canadian Payroll Association Management course chose Box 85 on the T4 as her research project. She contacted me by email, asking me to share more of my story as she'd come across information on my website that intrigued her.

After her presentation was completed, and she scored almost perfectly, Arlene and her employer were thrilled to share her presentation, both the MP3 recording and the written report with me and with all of you.

If you work in payroll management and haven't adopted a mandatory reporting for your employees, please listen to Arlene's report carefully, as she shares how much her organization has saved by adopting this strategy of full disclosure for their employees!  All I can say is WOW and if you haven't adopted full disclosure for Box 85 on the T4 yet, what's stopping you?

Thank you Arlene Jamison, PCP and St. Joseph's Health Centre for allowing me to share this with all of you.  St. Joseph's and their staff are very fortunate to work with Arlene.

Arlene's MP3 presentation (you might want to SAVE this to your desktop rather than open it as it might take some time to load as it is 6 MB):
http://db.tt/Uxdx3rGN

Arlene's 2 page written report: (not the same as the presentation) (31 KB word file)
http://db.tt/gUqb0PKa

Many of you may not know that one of my more passionate lobbies to the Minister of Finance has been to create a mandatory reporting of Extended Health and Dental Premiums on the T4.  It took a few years, but in 2007 or 2008, Box 85 was added as optional. It's never been made mandatory as someone complained about the compliance required.

I believe reporting in Box 85 should be made mandatory instead of optional, and in addition, I believe as an employee, you should receive a full reconciliation of everything that reduces your pay cheque from gross pay down to net pay. 

How else can you review what you're paying for out of your pay cheque?  It never ceases to amaze me how almost 40% (yes, that's over $30,000) of my husband's pay as a teacher in Vancouver, BC is funneled off to a multitude of other purposes, some of which we may never benefit from, and some of which we may pay into but never see a dime if we don't live long enough to collect.

It's no wonder that gov't can persuade other professionals to work on contract by forcing them to incorporate as "Personal Services Businesses" to avoid onerous employer contributions to pensions, benefits, and gov't programs.  That's the employer contributions on top of the employee contributions deducted from net pay.

Did you know that insurance agents and financial planners tell you you'll only need 80% of your current income to live on because 20% of your gross is being syphoned off to a variety of 'employee benefits and pensions, plus CPP, EI and Tax and if you don't live long enough, you'll probably see minimal benefit for all those contributions?

But back to the story of Box 85. In about 2004 I started writing to the Minister, asking why, since Union Dues were a mandatory reporting box, why weren't these premiums paid to private health plans equally important to be reported as paid to third parties by the employee.  After all, the premiums in many cases would breach the 3% of net income threshold for the family, and permit any extra costs for dental or other medical expenses not covered by the insurance to be claimed. 

Remember, and this is where many people don't realize that the wording of what you can claim is tricky. The key thing to remember, there is NO ceiling on how much you can claim. There is a threshold or minimum amount paid for medical expenses and that includes these premiums, that must be crossed before you can start to claim your expenses. I always use the example, of the millionaire who has a heart attack in Texas. The open heart surgery costs $200,000 and all but the threshold amount, which tops out at about $2,000 is fully claimable. Yes. $198,000 is claimable.

You don't have to believe me, it's on this fact sheet for 2011, you'll see that the medical expense tax credit 3% of net income ceiling is $2052 and for 2010 it was $2024.
http://www.cra-arc.gc.ca/nwsrm/fctshts/2010/m12/fs101201-eng.html