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More RDSP Talk

A while ago I spoke with Tom Drake at Maple Money about the DTC and RDSP. After some judicious edit’ing Tom has published the Podcast here. As usual you can read about the RDSP on my Registered Disability Savings Plan page.

For those unaware there are a bunch of very smart folks that I use for research on this topic (my wife being a major contributor), and whenever I do one of these talks, I get a few things not quite right (and this is no difference). My source at ESDC (who is very patient and kind) points out a few of my fumbles: I mention that the program is 10 years old, it was started in 2008, so that is a 12 years in 2020.

RDSP and Bankruptcy

Doug Hoyes and I have discussed (on his Podcast) about the topic of RDSPs and bankruptcy, but my source now states clearly:

“The Bankruptcy Act was changed last year through the Budget Implementation Act.‎ See 67(1)(b.3) of the Insolvency and Bankruptcy Act.”

ESDC Source

134 Paragraph 67(1)‍(b.‍3) of the Act is replaced by the following:(b.‍3) without restricting the generality of paragraph (b), property in a registered retirement savings plan, a registered retirement income fund or a registered disability savings plan, as those expressions are defined in the Income Tax Act, or in any prescribed plan, other than property contributed to any such plan or fund in the 12 months before the date of bankruptcy,

Bill C-97

RDSP After DTC Lost

If the beneficiary loses their Disability Tax Credit (DTC), it used to be that the RDSP had to be closed. I waffled around this one with Tom, but the actual answer is:

“As of Budget day 2019, a RDSP n‎o longer is required to be closed due to loss of DTC. During a period when the beneficiary in not DTC eligible no contributions can be made to the plan except for the rollover of funds from a RRSP of a deceased parent or grandparent upon whom the beneficiary was dependent.  During a period of DTC eligibility, the beneficiary will not accumulate annual grant or bond entitlements. The Assistance Holdback Amount will be determined as the ten year period immediately prior to the beneficiary being DTC ineligible, and will remain that period until the end of the year the beneficiary turns 50. Each subsequent year the AHA will decrease by a year. (51-9 years, 52-8 years,… 59-1 year). The year the beneficiary turns 60, the AHA is nil. Should the benficiary requalify for the DTC, the plan will operate as normal.”

ESDC Source

So the money hangs around until the person turns 60 and then can be withdrawn, as Tom Drake pointed out should be the case.

Each time I talk about the Registered Disability Savings Plan and DTC I end up learning more myself.


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Disability Tax Credit Policy Changes ?

Has the Disability Tax Credit policy changed? The CRA has not made any formal statement that the program has changed, however, the media implies otherwise. There seems to be an increase in stories about folks either having their applications denied or existing DTC holders having their certificates revoked.

A while ago we had to reapply for my son’s DTC and it seemed to go fine, however, that is far too small a data set to draw a conclusion from.

There have been stories of the CRA cracking down on false DTC claims (especially in the area of Autism and Brain disorders). There have been allegations that some “helping firms” have been supplying false applications, and the CRA is investigating these allegations.

There are also stories about an apparent change of policy for diabetics (with type 1 diabetes). If these folks are diagnosed under age 18 they are given the DTC, however, when they reach the age of majority, their DTC has been revoked (in some cases). The argument has been that their disability is not having a significant impact on their daily life (and that is the yard stick the CRA uses for disabilities).

My concern here is that there has not been any statement from the CRA or any apparent consultations with the public about this policy change.

For many folks disabilities there is no question, they are disabled, however there seems to be a push to revisit some areas. If the CRA chooses to change the rules for the DTC there is not much that can be done, aside from contacting your Member of Parliament, The Health Minister and the Minister in Charge of the CRA.

Policy Change ?

Does this apparent change in policy worry me. Yes, and my concern is not simply that my son may lose his “disabled” label (from the CRA), it is the apparent arbitrary nature that the new rules are being implemented, without public consultations.

The CRA can change the rules, but I think they should at least consult the public, or publish these new rules so we know what they are. A statement clarifying things would be helpful as well. It may well be that these are isolated cases, however, they may not be.

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CRA and me: Assessment Excitement

The summer of 2018, the CRA sent me a letter of assessment for my son’s school fees. These kind of assessments happen often. While I am slightly freaked out by them, it is still not a big deal. The letter asked for all associated documentation supporting my medical claim for my son’s school fees.

I dutifully collected all the receipts for the School and for my son’s Occupational Therapist. I wrote a cover letter outlining what I was sending and I sent it via registered mail to the CRA.

In that previous paragraph I made two mistakes (one small and one critical error):

  1. I could have easily scanned all the receipts and submitted them to the CRA on line. Much faster, and less expensive. Hopefully I will remember that for the next time.
  2. The letter asked for all associated documentation, and I misinterpreted that to mean receipts, and that caused a big problem.

 For those unaware, if your child is disabled you can claim their schooling or training as a medical expense. You must have a DTC first, and then ask permission of the CRA to be able to make that claim on your taxes. This is where my blunder took place.

My son had changed schools a while back, and I had never done a new letter outlining how his new school would help him with his disability (Autism Spectrum). Without this letter, and supporting documentation from his Doctor and other medical professionals, the CRA had every right to deny this claim on my taxes. As I did not include any supporting documentation with my assessment, the CRA denied my claim, and sent me a bill for what I owed.

The CRA was in the right to do this, and I was in the wrong for not sending it. I want to be clear on this point, I am not casting any shade on the CRA, they have actually been very helpful in this case.

It took a while, but I finally received my Assessment response via email, and I was shocked and upset to see the results(an over $4000 tax bill). After reading the email a few times, my wife read it and pointed out my mistake. She realized that I had not sent a new package outlining how the new school helped my son. I believe I sputtered and swore, but then came to the epiphany that my wife was right.

The past few weeks I have spent collecting the needed data and letters to support my claim for my son’s school expenses, and submitted them (electronically) to the CRA.

As the date of when I was supposed to pay my new tax bill came closer, I realized my reassessment was not going to be completed in time. Again, this was due to my procrastination, not the CRA inaction. I decided to call the CRA, and they directed me to their collections group.

When I spoke to the collections person, he brought up my file, I explained that I had submitted the needed documentation, and they decided to give me a 90-day extension on my due payment. This means I won’t have to fork out $4000 at Christmas time.

There is no guarantee that the CRA will accept my claim and documentation. Given the amount of supporting documentation I am hopeful that this is sufficient, but at least I won’t have to pay out a large sum of money now (that might be refunded later).

Conclusion

As I have said previously, if you don’t ask the answer is always no. I asked the CRA for clarification on what they needed, they provided that to me. The CRA also granted me an extension on payment, because I asked, and had a good set of reasons.

Sometimes the CRA screws up, but in this case, they are actually the heroes in this story (so far).

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Apply for the DTC Please

I have spoken with a few folks who have convinced themselves they can’t get the Disability Tax Credit (DTC) so they won’t apply for the DTC. Given the stories lately about the CRA rejecting many applications, and how complicated the process is, many folks are not applying (when they should be applying).

Allow me to be clear, apply, fill in all the forms and let the CRA decide. If you don’t apply, you will never get the DTC.

Do the work, make sure you fill in the forms well, get all the help you can, but apply, please!

To paraphrase Wayne Gretzky you will receive 0% of the DTC applications you never send.

Without a DTC there is no RDSP, and while the Disability Tax Credit is not a large credit, it is still vital to have it to be able to get other services and help from the government. It is not easy to navigate the government red tape, but it is the most important thing you can do for your child or your loved one.

Apply for DTC

Should you Apply for the DTC ?

If you or your loved one has a disability recognized by the CRA or on their list, then yes is the answer.

Let me repeat my message, if you don’t apply you will not get the Disability Tax Credit, if you do apply you might (but if you don’t ask the answer is always NO).

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DTC RDSP Vicious Circle

While chatting with Kerry from Squawkfox, Mrs. C8j and I did some research and an interesting point was found, about the DTC RDSP vicious circle.

The non-refundable nature of the DTC has created a situation where some low-income disabled people don’t even bother to apply for the DTC, thinking it won’t benefit them. That can often be a mistake, as DTC certification has become a necessary requirement for a number of other government programs, such as RDSPs (registered disability savings plans) and the child disability credit.   “

That one left me quite upset. There is data about how few RDSPs are out there, but this explanation rings far too true for my liking.

This issue exists with RESPs too. Low-income families, think they need to save a lot to make the RESP system work. No! Open the account, put a small amount in there, but you might be eligible for the Canada Learning Bond, which is free money.

The Canada Disability Savings Bond

Getting back to RDSPs, there is a similar benefit for low income families. The Canada Disability Savings Bond is $1000 a year that can be deposited in your RDSP, even if you don’t make a deposit. This is why it is important to help folks with the RDSP.

No one should be leaving this kind of free money on the table.

The DTC RDSP vicious circle is what caused my wife to say, “The whole system is like navigating the fire swamp in the Princess Bride”.  That is a very apt analogy.

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