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Taxation Issues
Presented July 14, 1999 by Marnie Mackay, CA
Transcribed by Kevin Leung
Now don’t get me wrong, I find most of the Mac FP Academic ½ days to be nothing
more than a bunch of time wasting dribble but here is one of the gems in the morass of
verbal diarrhea.
The reason. This session is about $$$!!!
Although probably best if it was presented in PGY-1 year, I’m afraid it
wasn’t due to planning oversight/indifference.
Here you will find a summary of take-home points from the presentation as well as the
handout that Marnie gave out.
The next session is: Nov. 3rd, 1999 and the final one for the academic year
is in March, 2000.
So without further ado…
The MOST important stuff
 | Get a:
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| Insurance agent à disability insurance. The term
contracts provided by your medical association are renewed on a 5 yr basis and if the
association ever changes carriers, the new carrier is not obliged to insure you. This
happened several years ago with the dental association and those dentists that had
previously claimed were not able to get continued coverage. In addition, if you decide to
increase your coverage amount, you MAY be required to provide proof of your health status.
Although this is not necessarily tax deductible, your benefits are also tax exempt? (is
this true?). Remember to throw in office overhead insurance to cover the cost of running
the office while you are sick. This is a small fraction of your disability insurance cost
as usually you only get 12 months of coverage for the office overhead. Presumably, you
would sell the practice if you were required to shut the office down for longer than this
period of time.
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| Legal agent à wills & estate planning, lease
contracts, cohabitation contract (i.e. premarital agreement). After 1 yr of cohabitation
you are considered common law and even though your assets may be protected, your income
may not. As a doctor, you are likely to be the higher earning member of the couple
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| Accountant à besides decreasing the likelihood that you
will be audited, they can help in the more isoteric aspects of claiming tax deductions to
the hilt. A rough estimate is if you are filing a personal "business" tax
return, it may cost you roughly $400-600. Expect to pay more if you have employees. This
amount is deductible if you are a business. Sorry residents, no luck. |
General Info
| Keep a separate bank account +/- VISA and Line of Credit so you can accurately separate
your business expenses from your personal stuff. This is particularly important AFTER you
start you own self-employed business.
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| As you know, you are taxed on your marginal tax rate. The highest tax rate (48%) occurs
after you reach > $60,000 in annual income.
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| If you owe taxes, you have up to June 15th to file your tax return. HOWEVER,
you will be charged interest on the amount you owe starting April 30th.
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| Over the last 5 years, there have been NO audits of docs/dentists in Marnie’s
practice. This is probably because the government is focusing their attention on the black
market (ie: construction). Also, who the hell is gonna audit the books of someone making
$18,000 / year à THAT’S YOU PGY-1’s. |
Locums
| If you pay > $30,000 in expenses/fees to your slavermaster locum. Theoretically, that
person is required to charge you GST for those services. |
| Avoid terminology in your contract that makes it sound as if you are in an
employer/employee relationship. Otherwise, you won’t be able to count yourself as
self-employed and get all those tasty tax deductions. |
Starting Out
| Your books and instruments from medical school can be "transferred" to your
new practice as a reference library material and is depreciated. Even journals you’ve
been subscribing to and photocopies (and their associated costs) can be part of this new
library. Also, your filing cabinets, bookshelves, etc… also count. |
Automobile
| Since the MAC family program requires a car, you can claim a part of your lease, gas,
100% of parking and other auto expenses. Although getting to/from work does not count,
travel between hospitals and for the purposes of seeing patients counts. Seeing patients
while on call also counts.
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| If you are a locum and you have a "home office", travelling to your work site
also counts as deductible
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| In the acct’s experience, Revenue Canada has only asked for a driving log once and
the doctor was able to generate one based on his "average" driving. He had
claimed 90% of his driving as business related. In the end, Revenue Canada allowed 70-80%!
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| Get the T2200 form from payroll when tax time comes.
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| If you own the car à you depreciate it
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| If you lease the car à the lease amount (or work %
thereof) is tax deductible
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| The MAXIMUM allowable tax deduction off a work automobile is $29,900/year. Forget those
Porsche 959 and Mercedes 500’s.
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| The other way to calculate this is to claim 35 cents / work kilometer you drive.
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| For the car, deductions include Insurance, depreciation/lease, gas, car washes,
interest, and 100% parking. If you depreciate, 50% of that can be done in the first year.
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| If you already have a car, you can transfer this over to your business for deduction
purposes when you start your practice at it’s fair book value à
you can determine this by the automobile industry’s red book value of the car |
Travel
| Travel for the sake of exploring practice sites and setting up a practice in Canada
counts as tax deductible. This includes meals, accomodation as well as transportation. If
you are leaving Canada (ie: States) you may not be allowed to claim this as easily.
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| Remember to document your itenerary and who you saw/which practice you checked out in
order to make this legit. |
Conventions
| Although you can only go to 2 "conventions" /year, you can attend an unlimited
amount of continuing education activities.
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| As residents, only the CME course fee is tax deductible
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| You can attend out of country conferences only if they are not available locally
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| Cost to go includes, airport limo, accomodation, registration fee, plane ticket and
MEALS
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| Meals & entertainment à 50% of this can be deducted |
Professional Clothing
| Although general work wear is not technically deductible, any special clothing (ie: lab
coats) are 100% deductible.
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| Due to the increased "risk of destruction" (ie. Patients bleeding, vomiting,
pissing on you) in medicine, the costs of dry cleaning, and a reasonable amount of
replacement clothing is acceptable if you are self-employed. This would probably in the
range of several hundred /year. |
Paying Taxes
| The whole tax payment scheme is screwed up when you’re self employed. The big thing
to note is that your tax burden will be disproportionately low in your first 2 years of
practice but the 3rd year out is the "tax year from hell" when you
have to cough up almost 60% of your income in taxes. Read the pamphlet which explains why. |
Personal Comments
If you want to read Marnie Mackay's brochure, click on the links below:
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