Dues and don'ts of professional fees
2006-06-17 National Post
Do you pay annual professional membership dues that are not reimbursed by your employer? If so, you may be entitled to deduct them on your tax return, provided they are annual dues and not entrance fees.
The key caveat is that the dues are necessary to maintain your professional status and your professional status is recognized by a federal, provincial or foreign statute.
The Canada Revenue Agency is somewhat lenient on its interpretation of "necessary." It states that "such a payment need not be essential for an employee to hold a position or job.
"However, there must be a reasonable degree of relationship between it and the position or job."
For example, membership in the Canadian Medical Association is not required to practise medicine, while membership in the provincial College of Physicians and Surgeons is necessary. Accordingly, CMA dues would not be deductible but provincial college fees would be.
A recent tax case addressed this issue in the case of physiotherapy association dues. Katherine Shearman is a physiotherapist employed with the Canadian Back Institute.
She is registered with the College of Physical Therapists of British Columbia and has practised physiotherapy since 1998.
The college is a not-for-profit organization responsible for regulating the practice of physical therapists.
In 2003, Ms. Shearman paid $200 in fees to the College, which the CRA permitted her to deduct. She also paid $800 in professional dues to the Canadian Physiotherapy Association (CPA), which she deducted and the CRA disallowed.
The issue was whether the $800 paid to the CPA qualified as "annual professional membership dues, the payment of which is necessary to maintain a professional status recognized by statute."
Ms. Shearman testified that, according to the 2005-06 CPA Membership Guide, her total fee comprised association fees of $550 plus GST and insurance fees of $215.
The judge concluded that since the insurance fees are separate from the dues, and that insurance is also available from sources other than the CPA, it could not be properly considered part of CPA membership dues.
As for the $550 of actual CPA membership dues, there was no doubt in the judge's mind that these fees were "clearly ... professional-membership dues."
In order for them to be deductible, however, "they must be necessary to maintain a professional status recognized by a statute."
The judge determined that while "CPA membership enhanced her professional status," it was not required for any professional status. As a result, the amounts did not qualify for the professional fees deduction.
Ms. Shearman said the judge's decision was "unfair, because many other professionals have claimed deductions in similar circumstances and the deductions have not been challenged by the [CRA]."
This is a classic argument pleaded by taxpayers in Tax Court, but the judge concluded: "It is not something that the court can remedy. The only authority that the court has been given is to apply the words of the statute to the particular circumstances of the taxpayer."
GRAPHIC: Black & White Photo: John Mahoney, CanWest News Service; Physiotherapist dues may enhance professional status, but are not required to work, rules Tax Court.
|
|