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Prepayment of Medical Treatments = No Tax Credits?

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  • By: Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr – President & Founder of CGL Strategic Business & Tax Advisors

    Which came first, the payment or the expense?

    As of May 21, 2018, according to the website: https://turbotax.intuit.ca/tips/are-medical-expenses-deductible-5317 (image above) they recommend paying large medical expenses in advance in order to claim a tax credit in the year you paid.

    This is not entirely accurate.

    Payment alone will not guarantee that you can claim it as a medical expense.

    In an (originally issued in French) external interpretation issued by the Canada Revenue Agency on December 6, 2016 (2015-0589041E5 F) they clarified that prepayment of medical services only works for services consumed in the 12 months ended in the tax year.

    Relying on a 2001 Federal Court of Appeal case, the CRA stated,

    “an expense is “incurred” […] only where there is an obligation to pay a sum of money. […] we are of the view that a fee paid is not necessarily an expense incurred. This could mean that it is to be regarded as a prepaid fee. With respect to an amount paid for medical expenses, it must, therefore, be determined whether it is an expense incurred or a prepaid amount.”

    Uh oh.

    They are saying that there is a difference in the tax treatment between prepayment and an expense, which is why we have to figure out what the payment is.

    It seems to say that if there were no services rendered, then it isn’t an expense.

    Think of the following scenario:

    – Your child goes back to school in the fall.
    – You find out they need braces.
    – After some back and forth and budget planning you decide to go ahead.
    – The orthodontist in this example gives you payment options: pay up front or set up a payment plan (usually a higher amount overall).
    – You make the voluntary decision to pay upfront before installing the braces.
    – You pay the fee in late November in the tax year, but the braces are not installed until January of the following year.

    To this extent the CRA continues:

    “…medical expenses [for a particular taxation year must] have been paid within any period of 12 months that ends in the taxation year…”

    The CRA continues by stating that an individual can choose any 12-month period in the year, but the expenses must be paid in that period.

    “Thus, for the purposes of computing the METC, it is necessary to determine whether the expenses paid […] were paid during the period chosen by the taxpayer.”

    So yes, we paid during the period, but the CRA is using that word expenses, and we already know that they don’t call it an expense unless services are rendered

    This means since no services were rendered in the tax year, we cannot claim the prepayment as an expense (or at least according to them).

    The ruling gets worse.

    If you are like most people, you submit your receipts on a calendar year to your accountant and don’t give it much more thought than that.

    The CRA states how you could lose the deduction entirely:

    “where an individual chooses the period from January 1 to December 31 [of the taxation year] the expenses that are the subject of the METC computation must have been paid during the same period.

    For example, if a dental service is rendered on January 15 [of the taxation year] […] and the expenses are incurred at that time, the fees paid for that service would be medical expenses […]

    If these fees were paid on December 31, [of the previous year] they would not be eligible for the METC computation for [the taxation year] as they would not have been paid during the selected period.”

    Pardon?

    Yes, they are saying that if you prepaid for medical services, the amount held on deposit at your orthodontist’s office would not be considered expenses – even as the services are rendered – if the payment was not in the 12-month period reported on the return.

    So not only did you not get the expense in the tax year that you prepaid but because you filed your medical expenses on the calendar year, you don’t get the medical expense when the services were rendered either because there was no payment in the year.

    They do provide a little hind-sight relief, however, but it requires more filings subject to their approval (which is never a quick process). Simply put, they state that in this scenario, they would let you go back to amend the earlier tax year to include the expense.

    Personally speaking, this is frustrating because when you file the first year, they are saying it is not eligible, but after you file the second year, they tell you to go back and amend the first year.

    Seems like semantics, as the braces won’t be installed on your child unless you are both bound to some sort of contract including requirements to pay but watch for an over-zealous tax auditor to kick out your deposit in year one if services were not yet rendered especially where the deposit is refundable.

    My recommendation?

    In order to please the CRA, it is my suggestion that when you make the prepayment – rather than just getting your credit card slip and a statement of account showing the deposit – you need to have some sort of written contract or agreement with the medical practitioner’s office. This agreement should state that the prepayment is for medical services to be rendered by the practitioner and is non-refundable and that you have an “obligation to pay” prior to services being rendered.

    Hey… I didn’t say it was a GREAT recommendation… and most things to appease the rules in the Income Tax Act aren’t.


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    Health

    A LUXURY SPA experience in the heart of Central Alberta

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  • Safari Spas welcomed its first guests in 2003 with a goal of creating a truly exceptional luxury experience for residents in Red Deer and Central Alberta.

    Our team visits luxury spas all over the world in an effort to continually improve what we do.  We want our guests to feel like they are on a mini vacation each and every time they visit.  Our customer surveys tell us we hit the mark on a very consistent basis!

    Come relax in our beautiful spa, where we’ve created a deluxe environment: everything from glass mosaic and Italian tiles, fireplaces, frosted glass, lighted mirrors and extra plush chairs. Safari Spa & Salon offers massages, facials, manicures, pedicures, body wraps, body polishes, aromatherapy, waxing, and hair styling for men, women and children, among other services.

    Our level of service is over the top.

    We cater to our guests at every turn. We have created an experience within Red Deer that you would expect at a resort spa. It’s all about helping you recharge your batteries, getting your body, mind and soul back into alignment.

    We have a staff of 45, including four managers who ensure your experience is always 5 star. As long term members of our team, they care for the business as if it was their own.  Janelle has been with us since we opened. Chana started as a  hair stylist  and is now an integral part of our management team. Heather and Natasha are newer to the team and are our Customer Service gurus, always taking care of every little wish and desire of our guests.

    We are very proud of our deep roots in this community and support many worthwhile organizations and events.

    Of particular note is our annual Red Deer Festival of Trees, supporting the Red Deer Regional Health Foundation.  We’ve been an active sponsor of this amazing community event since we opened in 2003.

    We offer a variety of sublime services in a luxurious environment.  Click to take a virtual tour.

    We are proud to be the only AVEDA Lifestyle Spa in the region.

    Here are some of our most popular packages:

    Safari Ultimate $355

    Shampoo and Style, 60 minute Chakra massage, 90 minute customized facial, Aveda Spa manicure and pedicure.

    Couple’s Escape $485

    This is the perfect way to spend a relaxing day together. You will each receive a one hour relaxation massage, men’s spa facial for him, customized Aveda facial for her, then enjoy a spa snack and refreshment while sitting next to each other experiencing spa pedicures in our whirlpool pedicure spa chairs with fully adjustable heated massage chairs.

    Oasis $405

    Complete luxury in a serene atmosphere. This ultimate package includes: 1 hour relaxation massage, aromatherapy body wrap, customized Aveda facial, spa manicure, and spa pedicure. Relax in our serenity area and enjoy.

    Savanna $320

    Complete treatment for the body. One hour relaxation massage, spa facial, body polish and shampoo & style.

    Safari Indulge $300

    Sixty minute customized facial, 60 minute hot stone massage, pedicure, shampoo, condition and style.

    Safari Head To Toe $245

    Get pampered from head to toe with our customized Aveda facial, spa pedicure and one hour relaxation massage.

    Rain Forest $225

    A mini sampling of the spa experience. This package includes a customized Aveda facial, spa pedicure and spa manicure with paraffin wax.

    Gentlemen’s Oasis $245

    This package is created for the special man in your life. One hour relaxation massage, men’s spa facial and a spa pedicure.

    Stress Fix Pamper Package $230

    Stress can really take its toll on your physical and spiritual health.  Try our French Lavender infused Stress Fix Massage, pedicure and manicure to help reduce everyday stress.

    Pamper Package $195

    This is for those deserving to be pampered. Included in this package is a spa pedicure, spa manicure and one hour relaxation massage.

    Browse some photos and please click here to learn more about Safari Spa and Salon.   We are located in Unit 100, 31 Clearview Market Way, Red Deer.

    Please contact us through email clearview@safarispa.com or phone 403.314-9628.

    We have really convenient hours:

    Monday – Friday 9:00am to 9:00pm, Saturday 9:00am to 5:00pm and Sunday 10:00am to 4:00pm

    We are closed on the following days:

    • New Year’s Day
    • Family Day (February)
    • Easter Sunday
    • Labour Day (September)
    • Thanksgiving Day
    • Christmas Day
    • Boxing Day

    We are open from 9:00am -3pm on Good Friday, Victoria Day (May), Canada Day (July 1) and Heritage Day (August).

    We are open from 9-5 on Christmas Eve so you can start your Christmas celebration off right.

    Getting ready to celebrate the New Year?  We have you covered from 9-5 on New Year’s Eve.

    We open at noon on Remembrance Day so that we, along with our guests,  can attend services throughout the region.

    Please visit and let us spoil you soon!


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    Branded Content

    One Eleven Grill’s New Year’s Eve party includes a stellar band, great food and NO COVER!

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  • Let’s face it.  Making decisions about New Year’s Eve is tough, but it doesn’t have to be! We can make that decision a LOT easier!

    Join us New Year’s Eve for an amazing meal and excellent entertainment as Claude Godin and the Groove Ensemble take the stage with a combination of jazz, blues, funk, latin.  It’s going to be a fantastic night.

    Claude has shared stages with many well-known musicians, including Bo Diddley, The Platters, Powder Blues Band, Jack Semple, Matt Andersen, Matt Minglewood, Kim Mitchell, Fred Eaglesmith, Ian Mitchell & the Bay City Rollers, Big Dave McLean, Amos Gareth, David Ward, Russell Broom, Donald Ray Johnson, J.W. Jones Blues Band, Elmer Ferrer, Kenny Blues ‘Boss’ Wayne, Legends of Rock N Roll, Tim Williams, just to name a few.  Seriously, this will be a total musical treat. 

    So, what do you need to do?  Simply call us at 403.347-2111 and reserve your table today.  There is no cover charge.  You can also book online, but we really want to ensure that we have your correct booking information so please make the call. It’s going to be a great night and we don’t want any surprises beyond the usual wonder that is New Year’s Eve!

    Here’s a Youtube audio track that will give you a great sense of Claude and his stellar band.

    You like to know a bit about your food? We are serious about our steak.  Watch this short video to learn about how we hand cut each and every steak we serve.

    A bit about Claude A. Godin (Saxophonist) – Biography

    A dynamic and versatile musician, Claude Godin creates mood and memories with music. Born on July 27, 1963, in Montreal and raised in the village of Robertville in New Brunswick, Mr. Godin deeply believes in sharing the gift of music. He spent much of his youth in New Brunswick and a decade in Prince Albert Saskatchewan, setting the foundation for an enduring career in the arts. He desired to see the west and later relocated to the growing suburban city of Red Deer, Alberta, Canada.

    Coming from an extremely musical family, Claude Godin was immersed in music from early childhood. Initial training began with inspiration from his father who often held jam sessions at the family home. He diligently focused on the basics and grew as a musician over the years. Focused and driven to perfect his art, Claude became well versed in Alto, Tenor and Soprano Saxophones as well as the Clarinet. He is also well versed in many other complementary instruments including: piano, guitar, bass and the drums.

    Claude invested time training with a variety of bands across the country while developing a love for what he calls ‘rootsy’ styles of music such as Jazz, Latin, Blues and Funk. He expanded his social circle to make contact with great players and producers in the local and national industry, those that encouraged his unique voice and expression.

    Claude is a promoted artist on the national scene and plays at open microphone opportunities to expose his style and the sultry pretty tones of his saxophones. He performs with several bands, some specifically designed for certain special gigs. Currently, he is excited to be forming a groove and funk band under his own name ‘Claude Godin Groove Ensemble’ and is performing with Edmonton Blues/Funk band -‘The Whisper Kings’. He has been featured as a solo artist on many albums with bands such as Greg Godovitz ‘Goddo’, produced by the Canadian rock guitarist Paul Dean of ‘Loverboy’.

    In 2011 & 2015, Claude won the prestigious ‘Saxophone Player of the Year’ from the Calgary International Blues Music Association. He has been featured in print and radio across the country and television on CBC. His enduring passion is; “To elevate the value and importance of the arts in our world, it is a gift and therefore should be treated with respect and shared freely with all humankind. If you can speak the language of music, share it with the world…it is yearning for it.”

     

     

    About One Eleven Grill:

    One Eleven Grill brings a chic, sophisticated vibe to the heart of Red Deer. Situated in the historic Old Brew Plaza building, constructed in the 1800’s, the restaurant is a combination of industrial and classic modernism. Our menu features the best market-driven, seasonal ingredients prepared in a simple yet elegant style. We use only the best Alberta Beef produced under our supervision. (read more)

    If you are looking for a restaurant with great food, great company, and an amazing atmosphere, you can find it every day or night at One Eleven Grill.


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    december, 2018

    wed21nov - 21decAll DayAlberta Sports Hall of Fame and Museum - Deck the Hall 31 Days of Giving-31 Days of giving(All Day) Event Organized By: Alberta Sports Hall of Fame and Museum

    sat15dec10:00 am- 4:00 pmParkland Garden Centre Craft and Market Sale10:00 am - 4:00 pm

    sat15dec12:00 pm- 6:00 pmArtisan Market Sale for Nuit Blanche Winter CarnivalArtisan Market12:00 pm - 6:00 pm

    sat22dec10:00 am- 4:00 pmParkland Garden Centre Craft and Market Sale10:00 am - 4:00 pm

    mon31dec - 1jandec 317:00 pmjan 1- 2:00 amBlack & White ballRed Deer\'s Party of the Year!7:00 pm - (january 1) 2:00 am

    mon31dec - 1jandec 317:00 pmjan 1- 1:00 amOne Eleven Grill New Year's Eve with Claude Godin and his Groove EnsembleCall 403.347-2111 to reserve for New Year7:00 pm - (january 1) 1:00 am

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