Several years ago, we wrote about the disability tax credit (DTC), focusing on the current qualification criteria and how important it is for a person with a physical or mental impairment to qualify, as it opens the door to a number of other tax programs for people with disabilities.
We also appealed to physicians and other professionals the Canada Revenue Agency classifies as "qualified practitioners" (optometrists, audiologists, occupational therapists, physiotherapists, psychologists, and speech-language pathologists) to certify a person is eligible for the DTC.
Unfortunately, I have been shown evidence lately that legitimate claimants are still being discouraged or refused on incorrect criteria, this time by the CRA itself.
A person can qualify for the disability tax credit if they suffer from several relatively minor impairments which, when taken together, cause the person to take an inordinate amount of time (or be unable) to perform any of the recognized functions of everyday living. The impairment must affect any one or more of walking, speaking, vision, hearing, dressing, feeding, bladder or bowel function, or involve life-sustaining therapy.
The physical or mental impairment must have lasted, or be expected to last, 12 months or longer, and must be severe, such that it restricts the individual all, or substantially all, of the time.
So the criteria are strict, but the rules clearly state even if a person can do a task in question, but these tasks take "an inordinate amount of time" due to the impairment(s), then the person may qualify.
So why is a local CRA office sending letters to doctors who have already filled out the CRA-approved DTC certification form, with wording that is inconsistent with the official form approved in the Income Tax Act?
DTC consultant Barry Ho of BMD Services brought this to my attention. He has shown me a letter that is being sent from the CRA to doctors, which includes an example scenario that incorrectly states a patient should not be eligible for the DTC until unable to walk, and points out this may be several years after the onset of a condition that impaired the patient's ability to walk.
This was a further follow-up letter from the CRA to a doctor who had already certified the patient as eligible. The doctor's own handwritten note back to the CRA asks, "This is the third time I have answered the same question -- why?"
The only answer I can come up with is that the CRA is working hard right now to have DTC applications denied. This may be because a few years ago a doctor had conspired with false claimants. As a taxpayer, I welcome them exercising proper diligence and care before approving credits, but not at the expense of legitimate claimants.
Taxpayers who have a physical or mental infirmity are dependent on their qualified practitioner to take the time to understand the nature of their impairment and make a best effort attempt to complete the T2201 DTCC form accurately, or they have no hope of receiving this tax credit.
It appears possible now that even those practitioners who take this time and care are subsequently being forced to answer a different set of ad hoc questions prepared by local CRA offices, which questions are not consistent with the official DTC form.
Ho also told of a client whose doctor had completed the T2201 DTCC form completely and correctly and answered a follow-up letter from the CRA, both appearing to certify qualification for the DTC. The doctor then received a phone call from the CRA, after which the patient was denied.
The DTC helps people access a variety of other programs, including the Registered Disability Savings Plan (RDSP), possible refund of GST/HST on qualified supplies and possible gasoline excise tax rebates.
The DTC is a non-refundable credit that can reduce current taxes by as much as $2,500 a year for the affected person or a supporting relative, as long one is paying at least that amount in taxes already. It can also be claimed for as many as 10 tax years retroactively to the date of impairment, which can mean a large tax refund.
The DTC helps people who have a physical or mental affliction that causes impairment in the activities of everyday living. It can be claimed by people who are working full time. "Disability" in this context does not mean disabled, or unable to work, function or be productive. It is meant to recognize the extra challenges faced by people with impairments.
The CRA website (http://www.cra-arc.gc.ca/disability/) is helpful. A person can complete the pre-qualification questionnaire on form T2201. Private websites (such as www.bmdservices.ca or www.disabilitytaxservices.ca) which are put up by private, fee-for-service disability consultants, provide a great deal of information. These are people who help with applications, in return for a fee.
These recent actions by the CRA may force more people to hire experts to enforce their proper and legitimate tax-filing position, and force them to share their credit. I would like to see a better balance between diligence and harassment.
David Christianson is a fee-for-service financial planner with Wellington West Total Wealth Management Inc., a portfolio manager (restricted).