taxdetective-Sandusky-Register

I'm going to say it.  It's April 29 and I deserve to rant.  The word is clueless.

As in missing the necessary clues to ensure that everything is filed.
As in missing the clues that prove that the income being reported is all the income there is
As in missing the clues that provide tax preparers with the clues that there are more medical expenses than those in the file... as in the dental receipts are missing, and the surgery for cataracts... yada yada...

Financial transactions, as in bank statements, Credit card statements, investment statements, registered account statements, those are how tax preparers figure out what you're not telling them because you are clueless about how many deductions and credits there are that you could claim if you only knew what was in the Income Tax Act.

Someone last week was amazed when I recommended reading the RC4064 and said no one will read a CRA publication.

Well, if you aren't going to read all the CRA publications, then you have to let me read your financial transactions reports instead. There is no other way.

Get over it. I don't care where you shopped and how much junk you bought, but I do care that the deposits equal what you are declaring as revenue. If I don't care, when you're audited, CRA will care. And you are guilty until proven innocent.

That painting or jewellery including all that gold you sold last year, that's proceeds on disposition, and there are rules about reporting your gains on the sale of those items.

If you think that because you don't have those statements, CRA won't be able to look at them, think again. They can and will demand to see your financial transactions.

So, you may as well produce them, and keep them with your records, for 7 years. CRA isn't going paperless any time soon. They may have electronic record keeping rules, but if you read those rules carefully, the requirements are meant for high tech situations where people have sufficient systems and software to maintain those records in readable form years from now. Not likely when you're trading up to new computers every year.

These days one does wonder, what lasts longer, your computer or your underwear?

If you're claiming the infirm $2000 amount for a spouse (haven't checked other types of dependents)

and if you're transferring it to the other spouse

You'd better check the math!

My software isn't picking up the extra $2000 on Schedule 2 from Schedule 5 on the couple whose return I'm just figuring out.

Did you know that someone who has access, even Level 1 access can look at all of your RSP contributions and figure out how much you have saved or withdrawn to/from your RSP's?

Did you know they can see your TFSA limit, so they know how much you have in your TFSA? That's easy. The TFSA has been around since 2008 and you may have as much as $25,500 if you've contributed $5,000 x 4 years plus $5,500 for this year.

Did you know they can look at your entire tax return history for over 10 years? They can figure out how much you've earned, saved, invested, gained/lost on capital transactions, tuition you've paid, years you paid to go to school, scholarships, how much you've withdrawn from savings, what your pension income is, how much you've paid for medical, child care, how many dependents you have and what their health and / or disability status is? I could go on, but that's a lot of information, and it's all on the CRA website available to every person you've ever given authorization to.

Here's a link to information you need to read very carefully. Your privacy may be seriously at risk and if you don't take steps to deal with it, anyone you've ever given permission to file your tax return or deal with any tax matters may still be able to see all of your personal financial information

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/chng_rps/menu-eng.html?=slnk

The T1013 form authorizes someone else to either get/give information (Level 1) or authorizes someone else to act for you (Level 2). Level 2 lets someone else adjust your old tax returns and now, they can adjust your address as well, so you wouldn't even know they adjusted your return. Until someone calls to collect or question the request, maybe months from now (if they have time, or enough auditors).

T1013 has provisions on it that a Level 2 person can make adjustments for someone else, directly through their representative ID online in My Account on the CRA website. There's no need to submit a paper adjustment request.

I've always believed that the only person who should be able to act for you is someone who has your Power of Attorney. That's because with a PA, someone competent to assess your competence to assign your PA has done that. You've met with a notary or a lawyer. They have a process they go through to determine if you are competent to give away your power to act. If they aren't sure, they are not just allowed to issue a PA, they must require your competence to be assessed by an appropriate medical professional.

There are safeguards. The Public Trustee in the province/territory can look into situations where someone may not have been competent to allow someone else to act for them at the time that power was given.

I'd like to know where the safeguards are.

It's bizarre, but if me, as your tax preparer, was assigned by you as a representative for CRA purposes, I can't remove myself from that status, only you, the taxpayer can remove me. In the mean time, I can go look at your records any time I want to. Even if I don't have you as a client any more.

What's bizarre, you think? Of course people would remove themselves... not true. I still have people on my list that haven't been my clients for many years. I don't go look at their tax returns, but I could if I wanted to.

If I'm a representative, CRA won't even remove me if I, as a professional, ask to be removed.

There's something very wrong with that. It gets worse. CRA can call me and tell me all about it. If that taxpayer isn't in compliance, or isn't paying their bills, years later. It's happened to me. I have to stop them from telling me all about you.  Staff at CRA will agree will start telling me all about you, even if I'm no longer in contact with you, years later. If you've ever given me either level 1 or 2, I still have it until you remove me.

If this is you, please do something about it. It worries me, that you don't take better care of who can access your information. If I'm still on there, how many other people have access?

You might have multiple representatives still able to access all of your personal financial information on My Account because you signed a T1013 at some point in the past.

Do you know who knows everything about your financial transactions and history? Every one of those representatives.

Want to know how to access your records to find out who has access?

1. Sign up for My Account on the CRA website. It will take a week to get access as you'll have to wait for a confirmation letter to gain access if you don't have access already. Then you can sign in and see who you've authorized, and cancel or add new Reps yourself.
2. Complete a T1013, mail it in and wait a few weeks for it be processed cancelling your Reps
3. Call CRA and ask. You should be able to demand that any Rep's you don't want to be there to be cancelled immediately.

Minister Shea, thank you for taking the time to consider my requests for effective processing of multi-year, multi-family adjustments.

It's very serious that CRA doesn't respect cover letters from professionals. I am dismayed that you find that this is acceptable behaviour on the part of CRA, and not enough of a problem to take action. We professionals take our order of operations, as set out in the ITA in S. 118 very seriously.

As for Level 2 authorization provided to anyone who asks for it. I'm shocked that this continues to be acceptable. I guess it's going to take a very serious fraud before anything is done. Vulnerable people are at risk when ‘promoters’ pressure them for Level 2 access to their taxation records.

 Level 2 access exposes people to fraudsters who now have significant personal financial information about their history, their savings, their income and lifestyle and can now make changes to those records with impunity. Limiting the fees that 'promoters' can charge isn't the way to deal with this. Of course there are consequences, if and when fraudsters are caught, but why have we opened the door and invited them in?

I will not give up on my belief of two things. I'm not giving up on either of these causes and will continue to raise awareness that:

1) Level 2 leaves the vulnerable family of persons with disabilities exposed to fraudsters and that the legislation proposed to limit fees for ‘promoters’ is the wrong approach.

2) The ITA requires an order of operations for personal tax credits that requires respecting family adjustments enough that there is an allowance to process them simultaneously upon request by a professional tax preparer. The logistics of attempting to process these adjustments any other way is mind boggling. It's like working with a circular reference in a spreadsheet, there is no resolution without compromise.

Regards, Eileen Reppenhagen, CGA
www.taxdetective.ca 604-943-7414

There was a weekly Q&A found in my blog as each week in January 2013, the participants of these webinars series asked questions and I answered in writing in my blog.  Look at the history each week in January for those posts. 

Hi, Eileen; My question is simply this. If I start drawing my union pension at age 60 and continue to work part time, Do I still have to contribute to the EI program, even though I will be denied benefits upon layoff, because I make too much? Thank you and Best Regards, MG

Answer:

CRA manages EI contributions, and Chapter 3 of T4001 explains the rules in depth, and there is a section on who doesn't qualify (keep reading) as well as who does found here: http://www.cra-arc.gc.ca/E/pub/tg/t4001/t4001-e.html#P574_52645

Here's a page of links to information articles CRA assembled because they get a lot of questions on this topic:  http://www.cra-arc.gc.ca/tx/hm/xplnd/menu-eng.html

If after you read these links, you feel your situation warrants it, check the last link on the last page (related topics) at the bottom and apply for a ruling in writing (anyone can do this) on a form CPT1

These are two separate concepts. Disability. Infirmity. One does not preclude the other, but one does not require the other. You may be blind, but not in the least infirm. You may be infirm, but not meet the definition of disability. These two concepts spawn various other tax expense and tax credit claims as well as programs. It's very necessary to differentiate between them because of those other programs, credits and expenses.
First some abbreviations

1. CRA is Canada Revenue Agency
2. ITA is Income Tax Act
3. QP is Qualified Practitioner (as in medical)
4. DTC is Disability Tax Credit

I spent five years (2005 to 2010) serving on the Disability Advisory Committee, advising CRA Benefits Administration on disability administration, specifically dealing with S. 118 of the ITA. At one point, I read S. 118.2(2) out loud to ~ 30 people, 12 on the committee and the rest from CRA, Finance and HRDC. We talked about each section for over 2 hours. That meeting totally changed how CRA communicates about medical expenses, and attendant care, and how they now list the over 150 medical expenses found in S. 118.2(2) and Regulation 5700 of the ITA in RC4064. It's why the RC4064 guide has the title it has.  CRA hadn't really considered the link between tax credits, including disability and medical expenses. The old General Guide read.. some common medical expenses are, and listed about 3 of the 150 in the ITA.
There is very distinctive difference in how the Income Tax Act treats and discusses disability, which is always referred to using the specific words "one or more severe and prolonged impairments in physical or mental functions". The title of ITA S. 118.3 is Credit for mental or physical impairment and this impairment must be certified in writing by prescribed form (T2201)
On the other hand, when the ITA discusses situations where it refers to infirmity, using that word, or some variation on it and there is NO prescribed form. All that's required is a QP's letter.
There are specific sections of the ITA that reference one or the other for various reasons. Disability (impairment) and infirmity are NEVER referenced together in the Income Tax Act, and that's because they are NOT same thing. Disability is its own credit, with its own form, T2201.
How can you tell? Every program that requires disability status, impairment in function, will specifically refer to S. 118.3 in the wording of that section.
Here's a list of the credits or programs I've found where the disability amount in S. 118.3 is specifically referenced:
S. 63(3) the bump up to $10,000 for the annual child care expense, S. 64 Disability supports, S. 118.2(2)(b), (b.1), (b.2), (l.9) are all medical expenses that specifically require the S. 118.3 disability amount, S. 118.6(3) education, tuition & textbook tax credit for part-time students, the age waiver for RESP's in S. 146.1(2.2) and for part-time enrollment in S. 146.1(2)(g.1), the First time home buyer amount for disability home purchase in S. 118.05, and the Home buyers plan, S. 146.01(1), the refundable disability child tax benefit in S. 122.61(1), the Fitness credit and the Arts Credit for the extra $500 if the parents spent $100 in S. 118.03(2.1) and S. 118.031(3) and the RDSP in S. 146.4 and the supplements to Refundable Medical Expense Supplement and WITB relating to the disability amount in S. 118.3.
Infirmity, on the other hand, isn't defined in the ITA, and it therefore, takes it meaning from the dictionary. I've only ever found one obscure reference to a definition of infirmity in an out of date Charities policy guide on dealing with the 'aged' where infirmity is defined as weak, feeble, frail, much like the dictionary. Believe me, I've searched for a definition for about 10 years now ever since I heard Tom Devaney talk about it in a workshop on tax in Burnaby.
Infirmity is what the new Family Caregiver Amount FCA is all about. Infirmity, which was previously mentioned in some of the credits, notably the caregiver amount for over 18 relatives, and the infirm over 18 credit, now that we have the FCA, requires documentation by a doctor, a qualified medical practitioner, and there are many QPs (qualified practitioners), listed specifically by type in the ITA who can write these letters.
There are also other words used in the ITA that describe various conditions, including handicap, mental or physical impairment, which is not the same as disability because it's not referring to S. 118.3 specifically, and doesn't require severe or prolonged impairment, and there are a number of programs that depend on the definition of infirmity for their criteria including:
Infirm beneficiary for an exempt foreign trust S. 94(1), Infirm dependent S. 118(1)B(d) and (e) which is the top up provision for dependents, the preferred beneficiary election in S. 108(1)(a)(ii)(A), Child care expenses transfer to higher income spouse when lower-income spouse is infirm in S. 63(3), Medical expenses in S. 118.2(2) (c) full-time attendant at home, (d) nursing home (e) school, institution, (g) & (h) transportation / travel, (l.2) renovations or new construction, (l.8) & (l.9.1) caregiver training & tutoring, part-time education amount and now the new Family Caregiver Amount for spouse, child, wholly dependent relative, caregiver, infirm over 18.
Nowhere in the ITA does the new FCA reference disability, yet, the newest release of the RC4064 guide has included the FCA under claims for a person with an impairment in physical or mental functions. It's as if who ever re-wrote the guide was trying to combine disability and infirmity into one category. I don't believe you can do that.
Why? The ITA must be taken as written, with attention paid to content, context and purpose, there's even a Supreme Court case that tells us how to read the ITA in light of its content, context, and purpose. Not even CRA can re-write the Act by issuing guides that are not interpreting the Act correctly.
The best document to describe the personal tax credits is the TD1. Note that the disability amount isn't one of the credits where you add the infirm amount for the FCA.
If you want an in-depth reading list of materials on this topic, I have several web pages of accumulated links that I reference all the time,
http://www.taxdetective.ca/links.html
http://www.taxdetective.ca/ptc.html
and if you are with an accounting or investment advisor firm, and want an in-depth session where you can ask questions, and discuss cases in your own boardroom, I do online presentations via GoToMeeting, and for this topic, it's a  minimum 3 or 4 hours to review the credits, the DTC, infirmity and medical expenses plus programs, and how credits are transferable, and apportioned between taxpayers, call me for a quote.
604-943-7414
Eileen Reppenhagen, CGA

If your care home or nursing home provides a letter indicating that the amount paid is for rent, because the provincial gov't is picking up the tab for the cost of care, that rent won't be claimable as a medical expense for tax purposes.
The provinces have set amounts for funded beds, for example, in BC, it's 80% of income is required to be paid for rent. The cost of attendant care, including nursing, cleaning, laundry, recreation, is covered by the province.
It's the attendant care portion of the cost of a nursing home or care facility that is claimable in Income Tax Act S. 118.2(2)(b), (b.1), (b.2), (c) or (d)
http://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-118.2.html
RC4064 has a good chart that breaks down the types of care and whether or not a prescribed form, T2201 is required, or a doctor's letter.
Remember, if someone is in a retirement home, if they qualify for the Disability Tax Credit, the cost of attendant care is claimable for up to $10,000 in the year, or $20,000 in the year of death.
Add that $20,000 to all the medical costs not claimed in the preceding 24 months, and that's a significant deduction to use against RIF income taxed at date of death.

Just don't shoot the messenger!

It depends on what type of practitioner you saw, and where you saw them, as well as what they did for you. If it was cosmetic, then no, you don't get to claim it. If it was a form or report, yes, you can claim it, but the practitioner will have to charge GST/HST on their service per the last federal budget (2013)...
There is a list on the CRA website that CRA puts a disclaimer on, as it may not be completely accurate or up to date because the provinces control who is licensed. CRA pays a third party for this list and were very reluctant to even post it when our committee asked them to provide disclosure. You'll find more about this topic on this webpage and the list is found under the Definitions heading
http://www.taxdetective.ca/ptc.html
This is a direct link to the list of authorized medical practitioners by province/territory for claiming medical expenses:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330/ampp-eng.html
References to medical practitioners, S. 118.4(2),
For the purposes of sections 63, 64, 118.2, 118.3 and 118.6, a reference to an audiologist, dentist, medical doctor, medical practitioner, nurse, occupational therapist, optometrist, pharmacist, physiotherapist, psychologist, or speech-language pathologist is a reference to a person authorized to practise as such,
(a) where the reference is used in respect of a service rendered to a taxpayer, pursuant to the laws of the jurisdiction in which the service is rendered;

Note: Speech language pathologists are not licensed in BC...
Have you ever seen me speak about this topic? Here's a video clip on YouTube:
http://www.youtube.com/watch?v=7vN4e0CWgrA

Q in my inbox just now: I hope you don't mind if I ask, can we claim any tax credits for my mother-in-law who is taking care of my children while we work? Can she be considered like a nanny? We give her money too on a regular basis. She is a landed immigrant and has been helping us with the kids as well as household chores since June 2012. Thanks a lot! I am looking for all possible ways to raise money for my child who was diagnosed with Autism Spectrum, therapy cost has been really overwhelming, ASD funding is not enough. Thanks so much for your advice and help!
A: Claiming relatives as caregivers is always an interesting topic. There are so many sides to this one. The claim might be for child care S. 63, disability support S. 64 or medical expense which is S. 118.2(2) (b) through (e) as various types of attendant care.
You'll find more information about each of those on the CRA website. Attendant care is covered off pretty thoroughly in the guide RC4064 with examples. Here's one example of where you can claim a caregiver as a medical expense in S. 118.2(2)(b.1)
http://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-118.2.html
If you change the 118.2 part of this link (above) to 63 or 64, you can read the rules about child care and disability supports, and also see form T929 for disability supports for a list and more information, which is only applicable where the taxpayer who requires support works or goes to school. (not likely in your case, but someone else reading this might not know about that expense claim option)
(b.1) as remuneration for attendant care provided in Canada to the patient if
(i) the patient is a person in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer’s tax payable under this Part for the taxation year in which the expense was incurred,
(ii) no part of the remuneration is included in computing a deduction claimed in respect of the patient under section 63 or 64 or paragraph (b), (b.2), (c), (d) or (e) for any taxation year,
(iii) at the time the remuneration is paid, the attendant is neither the individual’s spouse or common- law partner nor under 18 years of age, and
(iv) each receipt filed with the Minister to prove payment of the remuneration was issued by the payee and contains, where the payee is an individual, that individual’s Social Insurance Number,
to the extent that the total of amounts so paid does not exceed $10,000 (or $20,000 if the individual dies in the year);
Notice that the attendant can't be a spouse or partner, nor under 18, so it could be a mother-in-law,
and that receipts must have the SIN # of the individual, in other words, unless you are prepared for that person to report their income, and likely, your best way to ensure that, is to report their income on a T4 Slip to cover yourself.
There's nothing worse that reporting the caregiver expense, and then finding that the relative never reported the income, because they really didn't take you seriously.
Why wouldn't they refuse to report the income? Because their benefits and programs depend on their calculation of net income, and if you increase their income, their benefit programs decrease. That includes provincial and federal programs; Pharmacare which covers their prescriptions they may not be telling you they take, BC Medical premium reduction plans, OAS, GIS, GST/HST credits, and I'm sure there's more that I haven't listed here.
On the upside, if the caregiver has working income reported on a T4, they may be entitled to the Working Income Tax Benefit and the Refundable Medical Expense Supplement, real dollars when they haven't even paid any tax but they worked the right amount as an employee with a T4.
I'm thinking about doing a 3 hour workshop in three parts over 3 weeks, recording it with a live audience in May and I'll include more on this topic in that workshop. If that interests you, send me an email to get an invitation. I'll be recording it for sale, so you'll be able to type questions but won't be able to speak. There will be a nominal charge to be determined.

Saturday 8:30 am UBC Main Auditorium
Make that the day you take control of your financial future.. register now!
http://www.canadianmoneysaver.ca/events/

So from now on, I'm back posting in Blogger. I'm going to see if I can get those posts over from WordPress but at the moment, I can't even open my WordPress blog, no idea what I did, but there it is. I refuse to pay someone to figure it out either.

It's supposed to open at taxdetective.net but it won't open.

I've been harassed into using WordPress as my blog host. I know, it's not often someone can do that, but in this case, I'm giving them the benefit of the doubt, as they claim it is for my own good, but  so far, I find WordPress annoying. This morning I spent five minutes searching to find out how to change the password.

If you've been following me, don't un-follow this blog just yet, it may be back up and running.

But, for now, I'll give WordPress a sporting try at TaxDetective.net. Let me know what you think, and of course, I don't have all the features figured out, so if you have any helpful hints, bring it on.