DTC - Case Study of the Disability Tax Credit

I have a client who should have been receiving the disability tax credit, since he was declared disabled and began receiving CPP disability benefits in 1993.

CPP disability benefits are more difficult to get than Insurance company disability. The disability in CPPs estimation must be prolonged and severe.

Canada Revenue Agency (CRA) denied the tax credit, even though this client was considered disabled by CPP. Two government agencies with the same mandate--serve Canadians and be fair. One says yes to other says no. Go figure.

The CPP disability payment is small, equal to a CPP retirement payment. It is taxable and each year this client would receive his disability benefits and CRA would assess the tax accordingly.

As there are no provisions with CPP to deduct tax owing at source. The client received the full benefit and was unable to pay the tax owing. Each year more tax, interest, and penalties were added on to the client’s CRA account. He received letters and phone calls demanding payment.

"This client can explain the world political system, but can’t balance a cheque book or understand how a credit card works!"

Eventually the Tax bill with interest and penalties reached over $45,000. CRA garnished the client’s bank account to the tune of $90 per month. While at the same time was adding $180 per month in interest and penalties to the arrears account.

Enter Lembi Buchanan. A woman of amazing courage, determination, strength and compassion. Her husband suffers from a severe mental disability the same as my client. He was denied the Disability Tax Credit by CRA. Learn more about Lembi Buchanan and the Disabiity Tax Credit.

Lembi fought for the DTC with CRA for years eventually taking them the Tax court. She won!

It was her sole work and effort over many years that finally forced CRA to change its discriminatory policy to include, all the disabled of Canada in the spirit of fairness.

Following Lembi’s lead I gathered all the required information from the client and presented it to CRA. Immediately the garnishment was lifted the Disability Tax Credit was applied going back to 1999, which halved the Tax bill. We continue to work to have the Tax credit applied right back to 1993 when the disability began.

Each year when the client files his Tax return the DTC creates a refund which is currently being applied to the outstanding tax arrears balance. The unused portion is rolled over to the client’s spouse and she receives a refund on her taxes.

The Disability Tax Credit is not a cash pay out to a disabled person. It simply reduces the amount of Tax the disabled has to pay. Thus enhancing their quality of life.

Even with the best disability coverage in the world, you will earn less income than if you weren’t disabled. A major disability can be Hell on earth.

Make sure your Tax preparer is aware of and implementing the DTC for anyone you know who is disabled. It’s the least we can do.

You can download the CRA Disability Tax credit application here ===> Disability Tax Credit Form

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