ACFP First Five Years in Practice Committee

Tax Tips Session

• Faculty/Presenter: Dr. Dinesh Witharana

• Relationships with commercial interests:

➢ Grants/Research Support: Not Applicable

➢ Speakers Bureau/Honoraria: Not Applicable

➢ Consulting Fees: Not applicable

➢ Other: This presentation is hosted and supported by the Alberta College of Family Physicians.

Mitigating Potential Bias

• ACFP: → The ACFP’s Sponsorship Guidelines apply to this presentation. The ACFP abides by the College of Family

Physicians of Canada’s Understanding Mainpro+ Certification Guidelines, the Canadian Medical Association’s Policy Guidelines for Physicians in Interactions With Industry and the Innovative Medicines Canada Code of Ethical Practices (2016). As a non-profit organization, the ACFP complies with Canada Revenue Agency regulations. When deliberating acceptance of sponsorship, the ACFP considers and accepts sponsorship only from those whose products, services, policies, and values align with the ACFP vision, values, goals, and strategies priorities.

• Tax Tips Planning Committee: → Consideration was given by the Committee to identify when Committee members’ and speakers’ personal or

professional interests may compete with or have actual, potential, or apparent influence over program content.→ Material/Learning Objectives and/or session description were developed and reviewed by a Planning Committee

composed of experts/family physicians responsible for overseeing the program’s needs assessment and subsequent content development to ensure accuracy and fair balance.

→ Information/recommendations in the program are opinions of the independent speakers and will be identified as such.

Objectives

By the end of the session the learner will be able to:

1. Provide a list of potential business and personal tax deductions specific to early career physicians.

2. Share any other practical tax tips (i.e. tracking mileage/separating business and personal expenses/etc.

Note: References from CMA Tax tips, Physician Financial Independence Forum

Business Deductions

Expenses that help the business earn income.

Business Deductions

1. Accounting and legal fees

2. Advertising and promotion

3. Specified amounts for meals and entertainment (see below)

4. Annual medical licence fees and certain professional dues

5. Bank charges

6. Interest on office loans and lease payments on assets used for business purposes

7. Convention expenses (for tax purposes, you are generally allowed to deduct two conventions per year)

8. Maintenance and repairs for the office and equipment

9. Professional development

Business Deductions

10. Capital cost allowance on your professional library

11. Office expenses

12. Capital cost allowance on specific capital expenditures (e.g., medical equipment or leasehold improvements on your office)

13. Salaries and employee benefits

14. Utilities: heat, lights, power and water related to the business

15. Insurance: malpractice, office and practice overhead

16. Certain travel expenses related to your practice

17. Home office, in certain circumstances (see below)

Business Deductions

MEALS, ENTERTAINMENT AND PROMOTION EXPENSES

-Entertainment expenses, as defined by the Income Tax Act, are only 50% deductible

-Practice promotion expenses, however, are 100% deductible

i.e. Taking an associate to dinner to discuss a particular case qualifies as an entertainment expense

Business Deductions

UNION, PROFESSIONAL AND OTHER DUES

-Amounts paid for membership (required to maintain a professional status recognized by statute) in medical associations or the college of physicians and surgeons of a respective province or territory are generally deductible.

-Other payments for membership in professional organizations may be deductible as a business expense. If in doubt, contact your tax advisor.

-CMPA/Malpractice insurance premiums are deductible as well

Business Deductions

(consider reimbursement personally from corporation)

HOME OFFICE

Deductible if either:

-The home office must be your principle place of business, that is, as the main location of a business that you operate. “Principle” in generally interpreted by the CRA as being 50% or more;

-The home office must be used on a regular and continuous basis for meeting clients, customers or patients.

Business Deductions

(consider reimbursement personally from corporation)

HOME OFFICE

(con’t)

The most common situation in which a physician may qualify for a home office deduction is when they are work from multiple locations as a locum since they can be considered to have no other fixed location to conduct administrative tasks such as scheduling, documentation, billing, ect. Additionally, physicians performing services through their home office for Telehealth and/or home visits would also qualify.

This is a challenging area of tax law, and recent pronouncements in the tax literature have addressed this topic. Seek professional advice if you believe you may qualify to deduct a home office.

Business Deductions

(consider reimbursement personally from corporation)

TRAVEL EXPENSES

When any personally owned vehicle is used for business purposes, it is important to keep a log of the business use. The owner is then reimbursed on a per KM basis for the business use. Travel from home to the primary location of the business is not considered business use.

Business Deductions(consider reimbursement personally from corporation)

MOVING EXPENSES

-If you have relocated at least 40 kilometres closer to a new work location

Personal Deductions

CHILD CARE EXPENSES

Under certain restrictions, the cost of daycare, babysitters, boarding schools and camps is deductible

MEDICAL AND DENTAL EXPENSES

You can find an extensive list of eligible medical expenses on the CRA website.

CHARITABLE DONATIONS

The federal charitable tax credit rate is 15% on the first $200 and 29% on the remaining $200. There is provincial charitable tax credit, as well as a first-time donor super credit.

RRSPs

THINGS I WISH I KNEW….

Courtesy of Members of the

Physician Financial Independence (Canada) Group

THINGS I WISH I KNEW….

“Emphasize putting half of earnings in a savings account for tax paying. Emphasize building an emergency account with 10% of all net earnings. Then live life with the rest.”

“Make a point of putting away money the first year to prepare for the big tax bill after that first year. Especially since you then have instalments for the upcoming year.”

Live like a broke resident for at least a few years!! Do not start spending money on a lot of stupid s^&*!!

Talk about the costs first year in practice (depending on specialty and depending on province). No one talks about this as a resident and all of a sudden - kabam! you're expected to have this extra 20-40K sitting around to pay for licensing fees and CMPA and and and....

THINGS I WISH I KNEW….

Create a system for keeping track of expenses, receipts, bills etc., such as a filing system, labelled binder etc. It takes very little extra time to slot loose papers into your filing system than a box or envelope with everything mixed together, and it makes things way easier when it comes to tax time.

i.e. Quickbooks Self-Employed (auto tracks mileage too), Mile IQ tracks mileage, Excel spreadsheets for expenses, etc.

THINGS I WISH I KNEW….

1. Warn them about lifestyle inflation. Encourage establishing a high savings rate early.

2. Agree with warning them about setting aside money for the obscenely high tax bill in the first 1-2 years of practice before instalments start. About 40% of their income is not their money, it's the government's money.

3. Tell them to be careful. Lots of businesses will be interested in their money - financial advisors, insurance sales agents. They should understand exactly what they are signing up for.

4. They need an accountant with experience dealing with physicians.

5. They should negotiate their LOC to have a rate of prime - 0.25%, as many in this group have been able to secure.

6. Tell them to make sure they look into having appropriate and clear contracts when joining a group practice, etc.

THINGS I WISH I KNEW….

Having a good list of what is tax deductible for the corp helps.

1. Home office space and part of utilities (including internet)

2. Phone

3. Car mileage

4. Medical Memberships

5. Apply for the CMPA reimbursement program

6. Books and other equipment previously bought that can be deducted.

7. Courses, conferences, podcasts, journals, UpToDate, etc.

8. Hotel, food, flights, car rental, and anything else related to courses/conferences/work.

9. Dinners/lunches with medical colleagues.

10. Parking (work, conferences, meetings, etc)

11. Office expenses (Computer, cases, cords/chargers, phone, phone case, workbag, printer, etc)

12. Banking/Credit card fees

THINGS I WISH I KNEW….

Other things:

1. Separate credit cards for Personal & Corp accouts

2. Bank & Credit card fees (Personal & Corp) - All or at least most fees should be waived.

3. Personal LOC - switch to a bank that doesn't close the LOC after residency and secure LOC at prime -0.25.

4. Dump all the salary on your LOC (as long as it is not closed) to keep interest/payments low. Then take lump sum for taxes when needed.

5. Life Insurance - Can be placed through the corp

6. Health Insurance - Can be placed through the corp.

7. Health Insurance - activate ASAP towards the end of residency to avoid needing a physical exam.

8. Disability Insurance (Personal account, not corp) - Sign up if haven't already. Many times physicals are also waived if down before becoming staff or within a few months of finishing.

THINGS I WISH I KNEW….

Give them a list of accounts to open:

TFSA, RRSP, RESP, Individual and Corporate as applies.

Tell them to put a minimum in each and set up monthly withdrawals from their bank accounts to fund them. The powerful habit of regular savings and investments needs to start early!

Specifically mention Questrade or QTrade to ensure they understand that MDM is not their only option.

Tell them to google Canadian Couch Potato and tell them about this FB group and the many physician money blogs which are popping up.

THINGS I WISH I KNEW….

1. No whole life insurance.

2. Don’t inflate your lifestyle too much, too quickly.

3. Don’t get a divorce

4. Invest in your first marriage - it’s worth it(usually.. if there’s abuse run like hell, get a lawyer and take him/her to the cleaner)

5. Don’t have more kids than you can afford and when you’re done having kids .. do something so there aren’t any surprises

6. Travel.. have a conference wrapped into it.

7. Don’t get a divorce

Questions?

https://www.acfp.ca/membership/first-five-years/transition-to-practice/