Tax deduction pointers

The new year signals, for a lot of people, a renewed commitment to personal and career goals, and perhaps a new diet or exercise regimen. It also marks the start of another tax season. For doctors, getting ready for this year’s tax filing may require a bit more work than in previous years. With more Canadian physicians providing virtual care—a trend that lifted off in March 2020—and many delivering telemedicine right out of their home, knowing what to claim as tax deductions or credits can be more challenging. In general, it’s quite common for professionals and business owners to leave thousands of dollars on the table because they’re not sure if they can claim certain items or they have no proper system for recording these deductible or creditable items,” said Asghar Baig, a chartered professional accountant, certified management accountant and partner at Think Accounting and Consulting in Brampton, Ont. “The move toward work-at-home and, in the case of doctors, virtual care could mean even more deductions left on the table.” Read: The book of awesome: A few of our favourite things Here are five things to keep in mind as you compile this tax year’s deductions and credits: 1. Do sweat the small stuff Chances are you’re already claiming deductions or credits for big expenses such as operating costs, licensing and membership fees, and professional development and training. But what about that bulk pack of paperclips, your once-a-month drive-through car wash, or the cup of coffee you grab every Sunday while catching up on paperwork in your neighbourhood Starbucks? your neighbourhood Starbucks? These are small expenses that can add up to significant tax deductions, says Baig. “Let’s say you’re a physician with your own practice and you’re ignoring around $5,000 of expenses,” he said. “If you’re in a marginal tax rate of 53% then you are throwing away almost $2,700 for no reason other than you didn’t bother to claim all your deductions.” 2. Quick method versus detailed claims To streamline tax filing, Canada Revenue Agency has introduced a number of quick-method formulas for submitting certain claims. Claims for home office use, for instance, can be filed using a flat-rate method that allows for $2 a day in deductions, to a maximum of $400 a year. If it’s costing you more than $400 a year to work out of your home, you’ll likely want to submit a detailed claim. “You’ll need to be able to demonstrate to CRA that these expenses are genuine and they were necessary to bring in or operate the business. Read: Reasons for joy: A reminder of the 10 classic reasons it's great to be a doctor 3. Tracking expenses: Yes, there’s an app for that There’s no excuse these days for not tracking your expenses, says Baig. And no need either to be stuffing your receipts in shoe boxes or in your car’s glove compartment. “There’s all kinds of software out there that lets you just take a picture of your receipts,” said Baig. His accounting firm recommends clients install a mobile app called Dext, which allows users to snap a photo of receipts and other expense documents, then sends the data directly to the accountant. “We will get a notification and then we go into our accounting system, match and save the transaction in your account,” explained Baig. “Everything is live and happening in real time. For physicians who make house calls, Baig suggests using an app called CarIQ, which tracks the mileage you drive, records date, time and location, and lets users identify which trips are for work and which are for personal purposes. 4. It can get complicated so bring in the experts Does your business rent office space from a real estate corporation that you own? Have you used a life insurance policy as collateral against a loan, or donated a policy to charity and continue to pay the premiums? The tax deductions or credits you’re able to claim in these scenarios may not be clear cut, and even your accountant may need help figuring it out. Read: Patients without doctors—coast to coast “The more complex your finances get the more you need to seek the help of specialists,” said Elke Rubach, founder and principal at Rubach Wealth in Toronto. “In some cases, you may even need to bring in a tax lawyer.” Working with specialists can also reduce the risk of being questioned and, worse, audited by the CRA, added Rubach. She’s seen cases where a client either didn’t consult an expert or chose to take the advice of another doctor— and ended up losing money. 5. Start planning now for the next tax year and beyond You’re busy, we get that. But time spent tax planning today will pay off down the road not just in hours saved but also in dollars, said Rubach. She recommends meeting with an accountant—particularly one who works regularly with doctors—as well as a financial adviser to develop a wealth, growth and management plan that includes a strategy for optimizing taxes. Ideally your spouse or partner should be part of these meetings to ensure you’re planning holistically, said Rubach. “Proper tax planning with a professional who understands your business is critical,” she said. “Otherwise you could be losing out on opportunities to save on thousands of dollars in taxes each year, and over time that can add up to a lot.” Read: Rounds: Doctors with a funny bone

Tax deduction pointers

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