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Being disabled should not mean being disqualified from having access to every aspect of life.

Emma Thompson

FAQ-Tax Recovery

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Frequently Asked Questions about the Tax Recovery Process

Will I be eligible?

No disability automatically qualifies or disqualifies an individual for these credits. Every individual must be assessed on a case-by-case basis. Many people are eligible for these credits, yet a majority of individuals who could qualify, are not. This is for a variety of reasons, such as people believing misconceptions they have heard.

How long will the process take?

The entire process usually takes two to three months.

Can't I do this on my own, why do I need your help?

You can certainly file for any tax credit or supplement on your own. What we often find is that small mistakes can lead to someone becoming ineligible or not making full use of the tax credits which results in a smaller return. Making a mistake and having to make appeal and resubmit the information can result in an additional three month wait. Let's face it, who wants to deal with the Canada Revenue Agency (CRA)? The answer is, we do. Let us deal with the CRA and leave you with the knowledge that there is a trained professional on your side. Rest assured knowing that it has been done correctly from the very beginning.

What amount of money can I expect to receive?

The amount of money you can expect to receive depends on a number of factors. Many of our clients can expect to receive anywhere from $2,200 to $30,000.

Where is the money coming from?

The money comes from the Government of Canada because they understand that having a disability or caring for someone with a disability results in extra financial requirements. The amount of money may seem large, however the cost of caring for someone with special needs is often much more. 

Can I file on behalf of a family member?

Yes, of course you can.

I do not live with my dependent or supportive relative; can I still claim these credits?

Yes you can, although it depends on the kind of support you provide. 

My parent or grandparent has since passed on, but I believe they may have qualified. Is there anything I can do?

Yes, you can go back ten years. One word of caution, each year that goes by you will lose out on thousands of dollars.

I have a disabled child, who's a minor. Does that make a difference?

It certainly does. It likely means you're entitled to a large increase with your return as there are extra supplements that are provided for minors. Additionally, you can expect your Canada Child Tax Benefit ("CCTB") to increase quite a bit also.

I do not have a taxable income. Can I still claim these credits?

There are a number of benefits you may be entitled to, even if you do not have a taxable income. Further, many of the credits are available to transfer to your relatives, even if you do not live with them. 

To qualify for the RDSP, Canada Revenue Agency (CRA) must confirm that a child fits criteria for being ‘markedly restricted’ in the activities of daily living in one or more ways.

by KENNETH POPE LLB.AND PETER J. MERRICK CFP


 

Among the many considerations of parents and grandparents of children with severe physical and/or cognitive disabilities, perhaps one of the most critical is how best to ensure their children’s financial security when they are no longer alive to provide support.

The recent federal Budget has proposed the creation of a Registered Disability Saving Plan (RDSP) commencing in 2008. This plan,  which is very similar to the already establishedRESP,(Registered Education Savings Plan), will allow contributions to the RDSP by family and friends of a person with marked disabilities.

While contributions will not be tax deductible, they will yield both modest and major matching contributions by the federal government. The RDSP will only be available to families whose child qualifies for the ‘disability tax credit’ or disability amount in the Income Tax Act. To qualify, Canada Revenue Agency (CRA) must confirm that a child fits criteria for being ‘markedly restricted’ in the activities of daily living in one or more ways.

Lifetime RDSP contributions will have a limit of $200,000. Capital contributions withdrawn from the RDSP will not be taxed, as the tax has already been paid on these sums by the parent who contributes the money. Accumulated investment income will be taxable in the hands of the beneficiary as it is withdrawn. Properly planned, this will result in not just deferral of taxes but also non-taxation, due to the use of the personal exemption and disability tax credits available to the person with the disability.

The following is an example of sample family contributions together with Canada Disability Savings Grants:

Family Net Income and contributions compared to annual CDS grants:

Up to $74,357                                                  

First $500 - 300%

(maximum $1500)


Next $1000 - 200%

(maximum $2000)


$1,500 contributed 

generates $3,500


CDSG Totals $,5000



Over $74,357

First $1000 - 100%

(maximum $1000)


$1,000 contributed

generates $1000


CDSG Totals $2,000

 

Ottawa will pay the beneficiary a Canadian Disability Savings Grant (CDSG) as long as family contributions are made until the end of the year in which the beneficiary turns 49. There will be a maximum life- time CDSG limit of $70,000. Family income ranges and corresponding federal contributions will be indexed to 2008 when the RDSP begins.

Ottawa will also provide a modest Canada Disability Bond, much like the RESP Canada Learning Bond, for very low-income households.

Monies can be contributed to the RDSP until the end of the year in which the beneficiary turns 59. Payments to the beneficiary must begin when the beneficiary turns 60. There will be limitations on how much can be removed each year, which will significantly hamper using the funds for larger necessary purchases such as homes or accessible vans. Present information suggests that the annual maximum withdrawal limit will be based on the recipient’s life expectancy, and the fair market value of the RDSP, although details have not yet been determined.

To ensure that RDSP payments do not reduce federal income-tested benefits, amounts withdrawn from an RDSP will not be taken into account for the purpose of calculating credit. In addition, amounts paid out of the RDSP will not reduce Old Age Security or Employment Insurance benefits.

The potential effect of this income on federal and provincial income supplements, or Guaranteed Annual Income Supplement (GAINS), is not known at this time. If the income were treated as other income such as CPP, or investment income, it would result in a 50% clawback (reduction) on GAINS for every dollar of RDSP income. This would of course be contrary to the intent of the plan.

The bigger question is whether provincial disability benefits, which also provide income supports for persons with disabilities between the age of 18 and 65, would be offset by RDSP income. Since the RDSP arrangements are federal, there is no guarantee that withdrawals from the RDSP would not offset provincial benefits dollar for dollar.

The ideal would be that payments from the plan would supplement - not reduce - income support provided under these programs, at least until the level of income support plus RDSP payments would exceed the Low Income Cut Off as defined in each province and territory.

In the case where the beneficiary dies or ceases to qualify for the RDSP (as in the rare case, for example, where an individual is cured of his or her disability) any CDSG or CDSB funded to the plan within the 10 years preceding the death (or cure) and the income earned on such amounts, will have to be repaid. Amounts left in the RDSP after repayment of these sums must be included in the estate of the beneficiary.


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