CRA Hurting Disabled Canadians, Advocates Say

Last piece still missing almost 2 years after Ottawa OK’d bill to protect disabled taxpayers By Sean Davidson
CBC News, Mar. 25, 2016 5:00 AM ET| Last Updated: Mar 25, 2016

Almost two years ago, Ottawa passed a bill to limit what consultants could charge when helping others file for the disability tax credit. But the bill didn’t specify a limit and experts say the delay is hitting people with disabilities in their wallets.

Critics have long maintained the rules surrounding the disability tax credit need a re-do.

The non-refundable DTC isn’t worth enough, some say. The paperwork? Too complicated. The eligibility requirements? Too restrictive.

And then there are the fees that dozens of third-party consultants charge to help people claim the DTC too high, say critics.

Among those critics is MP Cheryl Gallant who, under the Harper government, put forward a private member’s bill to curb what she called the “predatory practices” of some consultants.

Canada Revenue Agency has said consultants take as much as 40 per cent of a DTC refund.

Gallant’s bill sought to put a limit on what consultants can charge. It passed in 2014.

‘This is taking money out of people’s pockets.’

– Neil Pierce, Multiple Sclerosis Society of Canada

But the act didn’t specify an actual figure or percentage for the limit. That part of the equation was to be filled in following discussions with the public, which were held later that year.

CRA has yet to take the next step publishing the proposed changes so that, according to a spokeswoman, stakeholders can have one more look before they are finalized.

CRA can’t say when that will happen.

The almost two-year delay is frustrating some who have fought to change the DTC.

“Not setting the limit puts both people with disabilities and legitimate businesses in a difficult situation as we approach the deadline for tax returns,” says James Hicks, national co-ordinator for the Council of Canadians with Disabilities.

Neil Pierce, national vice-president of government relations for the Multiple Sclerosis Society of Canada, says the delay is “taking money out of people’s pockets.”

Small flat rate

Gallant tells CBC News she would have preferred to specify a limit in the law itself. She was picturing a “small flat rate,” perhaps with an additional percentage allowed for cases that required extra work.

But, she says, it seemed a better idea to hear from disabled people and other interest groups to get a more accurate read of the situation.

The consultations also sought feedback about how to “simplify and clarify” the DTC, according to a government statement at the time.

In a statement to CBC News, CRA said it is still working on the DTC file, but can’t say when the details will be made public.

“Once the proposed regulations are pre-published, stakeholders will have a chance to comment on the draft regulations before they are finalized,” the agency said.

Apply first, then file

The CRA’s own estimates show that at least 1.1 million Canadians are eligible for the credit, half of them seniors. But only 620,000 claimed it in 2012-13, saving themselves a total of almost $1 billion in federal tax.

The basic DTC is an attempt to address the cost of living with an ongoing disability. People who qualify get tax relief that amounts to as much as $1,185 a year, with a supplemental benefit for those under 18 that’s worth up to $691 a year. Provincial credits provide even more tax savings.

The requirements for eligibility are laid out in CRA’s form T-2201. Among other things, the claimant must have a “severe and prolonged” physical or mental impairment that has lasted, or is expected to last, for at least 12 months.

But the DTC is unlike other credits in that the application must be submitted before the tax return, and it can’t be claimed until the application is approved. Claimants fill out Part A of the T-2201, their medical practitioner fills out Part B, which spells out the specific medical impairment.

The completed form is then sent off to the CRA. The ruling comes back usually within eight weeks. CRA figures show that, in recent years, about 90 per cent of the claims have been approved.

Once approved, claimants can ask for a reassessment to claim disability tax credits going back up to 10 calendar years, depending on when they would have become eligible for the credit.

Experts say some doctors don’t entirely understand the paperwork and requirements of the disability tax credit. (iStock)

Calls for reform

But claimants, and even their doctors, are sometimes confused by the DTC.

A common misconception, according to Winnipeg-based tax consultant and former CRA auditor Barry Ho, is that only the severely disabled are eligible.

“DTC qualifying rules include the severe, moderate and less-than-moderate restriction levels,” Ho says. “Doctors, for the most part, do not understand how to complete the DTC certificate for the moderate and less-than-moderate groups.”

Advocates continue to push for further changes, such as making the DTC refundable.

Because the DTC is currently non-refundable, it’s worth nothing to you if you don’t earn enough to owe tax. That’s a problem, says Hicks, for many low-income disabled Canadians who are nonetheless stuck with significant expenses.

“The DTC doesn’t do anything for them,” he says. “They’ve got a system that’s supposed to be helping people with disabilities handle the costs, but they don’t get any benefits.”

And while it may be possible to transfer all or part of the tax credit that can’t be used to a spouse, common-law partner or other supporting person, some people have no one to transfer it to.

The CCD collected roughly 800 signatures on a petition during the last federal election, calling on Ottawa to make the DTC refundable.

Others want to see the eligibility requirements broadened, to reflect the more nuanced and episodic nature of some disabilities.

Pierce says some people represented by his group can slip through the cracks of the current system.

Someone in the early stages of MS could have “significant functional impairment,” without fitting a strict interpretation of the current eligibility requirements, he says.

The problem, he says, is “much bigger” than putting limits on a consultant’s fees. He and the MS Society are among those calling for a more thorough overhaul of how people with disabilities are taxed.

Tinkering with smaller issues like consultants’ fees, he says, is like treating a symptom rather than the cause.

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