Kenneth Pope LLB, TEP will be sharing with us a series of articles that support special need and disability estate planning
The Canada Revenue Agency (CRA) is arbitrarily turning down applications for families seeking the Disability Tax Credit for their children, says Ottawa disabilities and estate planning lawyer Kenneth Pope.
The onerous application process is becoming increasingly challenging for competent families to complete without expert assistance, says Pope, principal of Kenneth C. Pope Law, pointing to a flawed system.
“An already arduous process is becoming even more difficult,” Pope tells AdvocateDaily.com. “What we’re finding now that we didn’t find a few years ago, is people who should clearly qualify are being denied after three attempts, and they now have to go to tax court to deal with these situations.”
The non-refundable disability tax credit can reduce the caregiver’s taxable income by up to $1,600 a year, he says. It also allows the family to apply for the child disability benefit and the Registered Disability Savings Plan (RDSP).
Not only is it difficult to get approved, says Pope, who assists clients with such applications on a daily basis, but the credit is overwhelmingly underused.
He estimates one-third to half of his new clients aren’t using these credits, either due to lack of knowledge or misinformation.
“It’s money they deserve to have and it also funds the RDSP,” Pope says.
The RDSP allows parents and others to save for the long-term financial security of a person who is eligible for the disability tax credit. The government matches the family member’s contributions up to $3,500 annually, he says, along with a $1,000 annual contribution for low-income participants.
Pope’s comments follow a recent story in the Globe and Mail, which details the challenges faced by families seeking the disability tax credit.
“When medical professionals provide a diagnosis — based on rigid criteria, no less — pencil-pushers in the CRA have no business second-guessing a medical decision unless there is evidence of fraud,” writes Globe columnist Andre Picard.
Pope agrees, suggesting many denials are made on the basis of subjective criteria. In his anecdotal experience, Pope says applicants are more likely to be approved if they use the term “autism” rather than “Asperger’s syndrome,” even though Asperger’s is on the autism spectrum.
“It’s frustrating for parents,” he says. “All they have to do is state what is true and they should be approved.” Instead, people who “clearly should qualify” are being denied up to three times, forcing court action and leading many people to seek legal help.
Pope says he has often achieved success by sending applications to different government offices in a bid to receive a different response.
He believes CRA officials who are processing these applications should receive sensitivity training similar to programs raising awareness about sexual assault in the workplace.
“When the truth is stated correctly and the application is declined, that’s a problem with the government,” Pope says. “There’s no question we’re now finding more of those files.”
One significant threshold for applicants is they must have a disability that is considered “markedly restrictive,” he says. As well, for the credit to be transferable, the parents or caregivers must support the child with food, clothing and shelter on a regular basis.
However, that doesn’t mean parents of a child in a supported facility can’t receive the credit, which is a common misconception, Pope says.
There are also implications with recent changes to the rules for testamentary trust income, such as Henson trusts, he adds.
Testamentary trust income is taxed at the top marginal rate. However, in a qualifying disability tax credit, the income may be taxed at the beginning marginal rate, Pope says.
“The child and their family, who are often dealing with greater stresses in managing appropriate health care, deserve all the benefits and credits available to them,” he says.
Learn more about the disability tax credit approval and transfer below: