The disability tax credit is often overlooked by taxpayers and can result in big tax savings or refunds, especially if the taxpayer fails to claim it for several years. Prior filed returns can be adjusted but only back 10 years. Therefore, the deadline for claiming this credit, as well as most other deductions and credits for 2009 is December 31, 2019.
To qualify for the credit, a taxpayer must have a severe and prolonged mental or physical impairment. Their eligibility must be certified by a medical practitioner or eligible specialist using form T2201, and the form must be accepted by CRA before the credit will be allowed.
When a taxpayer’s dependant falls ill, the focus is on caring for those individuals, not on the income tax implications of the illness. For this reason, tax consultants need to be vigilant about informing clients about this issue. In addition, taxpayers may be unaware that conditions like autism or diabetes may qualify for the disability amount. Where the qualifying person is a dependant, any part of the disability amount not needed by the dependant may be transferred to a supporting individual.
Taxpayers who become aware of their eligibility for prior years may apply for an adjustment of their return (or the returns of their supporting persons) for each year they qualify (back to 2009 if requested by December 31, 2019).
These taxpayers should see a DFA-Tax Services Specialist™ for details on making these adjustments, but for another reason, too.
Most professional tax specialists will prepare these adjustments for a minimal charge. But, taxpayers should beware of the promotors out there who advertise this service with banner ads like “Disability Tax Credit Services: Collect up to 45K in Refunds”.
CRA has noted that these promotors charge between 15% and 40% of the refund resulting from filing these adjustments for the disability amount. In spring 2019, CRA produced draft legislation (regulation to the Disability Tax Credit Promoters Restrictions Act) to limit the fees paid to such promotors, but these limits are not yet in place.
Additional educational resources: Expand on the role of the traditional tax preparer by earning your DFA-Tax Services Specialist™ designation. Offer holistic income tax filing and planning services to save your family and clients money on income and savings. Enrol or take a free trial today.
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