Disability Tax Credit & Registered Disability Savings Plan

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Marilyn Roberts
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1 Disability Tax Credit & Registered Disability Savings Plan

2 Disability Tax Credit Brief History/Information Filing of the DTC Potential tax savings

3 Disability Tax Credit The Federal Government offers a variety of benefits to people with disabilities. These benefits are provided under the assumption that these disabilities will require unavoidable, additional expenses that are not faced by other taxpayers. The Disability Tax Credit (DTC) is intended to act as a fairness measure for people with disabilities and their families. As such, it is designed to help offset the additional expenses associated with having a severe

4 What is the Disability Tax Credit (DTC)? The DTC came into being in 1988 as a nonrefundable tax credit which means it is designed to help to reduce a person's taxes owing. Therefore, if you already owe no tax, applying the DTC will not result in a refund being issued. This amount includes a supplement for persons under 18 years of age at the end of the year. All or part of this amount may be transferred to your spouse, common-law partner, or

5 Eligibility In May 2004, the Canada Revenue Agency (CRA) confirmed that insulin pump users, both adults and children, whose diabetes could not be well controlled with multiple daily injections of insulin, and for whom insulin pumps were a medical necessity, were considered eligible for the DTC under the existing life sustaining therapy criteria. This internal administrative policy decision was made retroactive to Prior to extending eligibility to insulin pump

6 Retroactive Application One of the features of the DTC is that if a taxpayer failed to claim it for a particular taxation year, they can back-file for up to 10 years and receive full benefit for each of those years, including the full year of diagnosis. This could mean a potential combined refund of thousands of dollars!

7 Don t be Scammed! Over the past several years, a number of companies have been created with the stated purpose of assisting individuals in applying for these credits. The implication is that the process is very difficult and should not be attempted by the Canadian public. Some also imply that they have "inside" information or contacts with Canada Revenue Agency and that without their involvement, people will not be able to access all of the credits available to them.

8 Applying for the DTC In order to qualify for the DTC, information relating to your medical condition must be reviewed by Canada Revenue Agency (CRA). This information is collected on form T2201 "Disability Tax Credit Certificate" which is completed by you and your doctor and then submitted to CRA. This form can be obtained online at (or google T2201 ).

9 Details It is always a good idea to keep a copy of all documents sent to Canada Revenue Agency. On occasion, Canada Revenue Agency may decline your request for the Disability Tax Credit based on the information submitted. If this is the case, ensure to submit additional information and if this fails to produce a positive result, a Formal Objection can be launched to appeal the decision. Instructions relating to the formal objection process is available on the T2201 form. Re-file for Prior Years: Upon approval of the DTC, you can then file adjustments to your income tax returns for up to 10 years back. To request a review of the prior years for which a person was eligible is an extremely simple process. All that is required is a letter to CRA containing the details of the request such as the years involved and other identifying information. A representative at CRA will complete all the calculations that are necessary to process a refund. It may easily take up to six months or more for the refund to be processed, but it is well worth the wait. Filing for Future Years: Once the DTC has been approved, you can also claim the credit in future years. When completing the income tax return, either the person with the disability (if they have taxable income to be reduced to zero) or the supporting person can claim the credit. If the person with the disability is claiming the credit, it is recorded on line 316 of the Income Tax Return. If it is being claimed by a supporting person, it is recorded on line 318. The claiming of the credit will reduce the taxes payable in the current year and for the length of term that CRA specified in the initial approval. Once the initial approval expires (automatically at age 18 and at other times as specified by CRA), you will be notified in writing and should complete and submit an additional T2201 form as soon as possible (if you wait until filing your next annual return, the process will be delayed due to the sheer volume being processed at this time). In summary, the Disability Tax Credit is something that every person with a disability should examine. It is simple to apply for and can provide some significant dollar advantages to individuals and their families. If you are uncomfortable with completing the paperwork on your own, don't hesitate to contact a qualified Accountant for assistance but remember that you can do it yourself for next to no cost.

10 How much is the Disability Tax Credit worth? Canadians with diabetes who are eligible for the DTC could see a federal tax credit of up to $1,100 as well as tax relief at the provincial level. Parents of children who are eligible for the DTC may also claim the disability tax credit supplement for children, which provides additional tax relief. They may also receive assistance from the Child Disability Benefit, which is paid as a supplement of the Canada Child Tax Benefit to low- and

11 Summary The Disability Tax Credit is something that every person with a chronic medical condition should examine. It is simple to apply for and can provide significant dollar advantages to individuals and their families. If you are uncomfortable with completing the paperwork on your own, don't hesitate to contact a qualified Professional Accountant for assistance, but remember that you can do it yourself for next to no cost.

12 Both are briefly are explained below: Additional Benefits of Being Approved Registered Disability Savings Plan (RDSP) Once you have been approved for the DTC, you may be able to setup up a Registered Disability Savings Plan (RDSP). The RDSP is a long-term savings plan, separated into two components, grants and bonds. It was introduced by the Federal Government in 2008.

13 Registered Disability Savings Plan (RDSP) A RDSP is a savings plan to help parents and others save for the long-term financial security of a person who is eligible for the disability tax credit. Contributions to a RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59. Contributions that are withdrawn are not included in income for the beneficiary when they are paid out of an RDSP. However, the Canada disability savings

14 Web Resources Diabetes Advocacy Canada: Best Canadian online resource for individuals with diabetes, includes excellent DTC related information including charts of how much time is spent on average per week of a person with diabetes on an insulin pump and on multiple daily injections recommend you print the appropriate page and bring with you to physician s office and submit with DTC application Revenue Canada: T2201 form and detailed instructions can be

Income Taxes module. After covering the topics in the module booklets or web pages and this workshop, learners will be able to:

Income Taxes module. After covering the topics in the module booklets or web pages and this workshop, learners will be able to: Income Taxes module Trainer s Introduction Most people are aware that they must file an income tax return in Canada, if only to claim back any excess taxes that were withheld from their income. Filing