Disability Tax Credit Public Consultations

Synopsis of public consultation input

Table of Contents

• Executive summary
• Purpose
• Background
  • Overview of the DTC
• Conducting public consultations
• What we heard – Key messages
• 1. Disability tax credit processing
  • Simplify the application form – the DTC certificate (Form T2201)
  • Simplify the application process
• 2. Disability tax credit communications
• 3. Disability Tax Credit Promoters Restrictions Act regulations
  • Cost elements to consider
  • Fee structures
  • Maximum fee
  • Reporting exemptions
• What we have done
• Conclusion

Executive summary

As part of the Government of Canada’s commitment to Canadians with disabilities, the Canada Revenue Agency (CRA) is continuously looking to improve the administration of the disability tax credit (DTC). In support of this commitment, the CRA conducted public consultations with Canadians in the fall of 2014.

The public consultations had two objectives:

1. obtain feedback on simplifying the DTC application process and improving communication surrounding the credit; and
2. obtain suggestions for establishing the maximum fee for completing a DTC request and related reporting exemptions to be set in regulations in support of the new Disability Tax Credit Promoters Restrictions Act (DTCPRA).

Canadians were invited to provide feedback via the CRA website, in writing, and through in-person consultation sessions.

The CRA received significant feedback from Canadians including persons with disabilities, tax preparers, medical practitioners, lawyers and members from diverse associations as follows:

• over 750 comments through the on-line channel
• over 50 written submissions
• participation of over 80 individuals at eight in-person sessions held in Vancouver, Toronto, Montreal (French) and Halifax
• meetings of CRA officials with seven national level medical associations and the newly formed Association of Canadian Disability Benefits Professionals

The feedback received regarding the DTC application process included suggestions on simplifying and clarifying the required steps for applying and claiming the tax credit. Suggestions for improved communication included, amongst others, better use of technology and increased support for the medical community.

For the DTCPRA regulations, many expressed concern that a small group of promoters are charging too high fees to support the DTC application process. Many different fee structures were proposed but there was no clear agreement on the appropriate maximum fee. While the feedback varied immensely, the input received will be of great assistance in developing options for the maximum fee and reporting exemptions.

Purpose

This document gives a synopsis of the feedback received during the disability tax credit (DTC) public consultations, held from November 4 to December 15, 2014. The feedback includes ways to simplify the DTC application process and to better communicate with Canadians, as well as input on the regulations for the Disability Tax Credit Promoters Restrictions Act (DTCPRA) which received Royal Assent on May 29, 2014.

The feedback helped the CRA develop measures to simplify the application process and improve communication, and will be of assistance in the drafting of regulations on the maximum fee and reporting exemptions under the new Act.

Background

Overview of the DTC

An individual with a severe and prolonged impairment in physical or mental functions may be eligible for the DTC. Once eligibility is approved, an individual may claim the disability amount on their income tax and benefit return and may request adjustments for up to 10 prior years, based on the eligibility start date. The DTC is a non-refundable credit used to reduce income tax payable, and any unused DTC amount may be transferred to a supporting person.

Being eligible for the DTC can also open doors to other federal, provincial, or territorial programs, such as the registered disability savings plan (RDSP), the working income tax benefit, and the child disability benefit.

To apply for the DTC, an individual, or their representative, must complete the Disability Tax Credit Certificate (Form T2201). The form has two parts:

• Part A – Basic personal information
• Part B – Medical information

Part A must be completed by the applicant, while Part B must be completed and certified by a medical practitioner recognized in the Income Tax Act. Once complete, the form is sent to the CRA for processing where it takes an average of six to eight weeks to finalize. During that period, the Agency may contact the medical practitioner to clarify or obtain additional medical information.

Conducting public consultations

From November 4 to December 15, 2014, Canadians were invited to provide input through various electronic or more conventional methods on two topics:

1. simplifying the DTC application process and improving communication surrounding the credit; and
2. establishing the maximum fee for completing a DTC request, and related reporting exemptions to be set in regulations in support of the new Disability Tax Credit Promoters Restrictions Act (DTCPRA).

The CRA received significant feedback from Canadians including persons with disabilities, tax preparers, medical practitioners, lawyers and members from diverse associations as follows:

• over 750 comments via the on-line channel
• over 50 written submissions
• participation of over 80 individuals at eight in-person sessions held in Vancouver, Toronto, Montreal (French) and Halifax
• meetings of CRA officials with seven national level medical associations and one newly formed association, the Association of Canadian Disability Benefits Professionals

What we heard – Key messages

1. Disability tax credit processing

Many comments received proposed how to improve the application form and simplify the process.

Simplify the application form – the DTC certificate (Form T2201):

• Shorten the form.
• Include more information about who can claim the credit and how to request an adjustment to previous years.
• Include a choice to allow taxpayers to request past year adjustments directly on their application form.
• Include more plain language in order to make it easier to read and understand.
• Review and clarify the definitions.
• Include more space to describe the effects of impairment.
• Offer more precise forms adapted to individuals’ conditions.
• Offer specialized forms for children – many felt that the current T2201 does not accurately reflect the type of impairments experienced by this age group.
• Create a simplified renewal form for individuals who need to reapply for the DTC once their eligibility period has expired.
• Clearly highlight required fields.
• Add charts showing cases that would automatically be accepted.
• Change the questions to multiple choice.

Simplify the application process:

• Improve the explanation letters that are sent to medical practitioners to request additional information.
• Give more time for medical practitioners to return documents to the CRA.
• Clearly inform the applicant when a letter is sent to their medical practitioner.
• Send copy of the letter informing of the status of the DTC application to all parties involved, not just to the applicant.
• Offer online application and tracking tools.
• Increase the use of telephone follow-ups to confirm the information provided by the medical practitioners.
• Have completed application forms reviewed by medical practitioners the CRA should hire.
• Accept supporting information from any individual, such as family members or professionals that are not medical practitioners.
• Centralize receiving locations, possibly reducing the processing time limit.
• Create a special DTC enquiry line, an email enquiry service and a counter service to facilitate the application process.

2. Disability tax credit communications

There were many suggestions to improve communication between the CRA and persons with disabilities, medical practitioners, disability associations, tax professionals, and the general public:

• Increase collaboration with partners to better communicate the DTC program.
• Improve the collaboration and partnerships between the CRA and other government departments with the goal of accelerating a taxpayer’s eligibility for any similar programs – this includes working through partners who deal with persons with disabilities.
• Provide better educational tools for medical practitioners.
• Improve methods to monitor the promoters’ activities and the fees they charge to help with DTC applications
• Improve awareness of the DTC program using traditional and new tools:
  • social media, webinars, and other electronic presentations
  • more videos on the DTC website
  • links of partner websites to the DTC website
  • specialized information sessions and reference documents for medical practitioners
  • information letters and mailouts
  • telephone calls, emails and text messages
  • in person presentations, seminars, and educational classes
  • radio, television, and newspaper ads

3. Disability Tax Credit Promoters Restrictions Act regulations

The consultations also invited input to establishing regulations for the DTCPRA which will set the maximum fee a promoter may charge for a DTC request, and related reporting exemptions.

A DTC request includes support for any activities required in applying for the DTC, claiming the DTC deduction on the T1 return, and applying or claiming any credits or benefits that are related to eligibility for the DTC. A promoter is defined as anyone who directly or indirectly accepts or charges a fee for these services.

Consultations on this theme concerned fee structures and models, cost elements to consider, deciding a maximum fee, and whether any promoters should be exempt from the new reporting rule.

It should also be noted that the term “promoter” was universally disliked.

Cost elements to consider

Some commented that DTC requests were very straightforward to complete so there would be minimal costs to consider.

Other promoters stated their requests were very complex and required additional tasks, including: driving applicants to medical appointments, pre-screening DTC applications to ensure that only valid DTC requests are submitted to the CRA, following up with medical practitioners to ensure that the right information is given on the DTC certificate, operating their own call centres to support their clients, advertisement and office overhead, geographic considerations for overhead expenses, postage for shipping documents across Canada to obtain doctor reports and signatures on the DTC certificate, and adjusting multiple tax returns for anyone who could have supported the person with a disability.

Several promoters said they operated on a contingency basis which involves a lot of risk, including their ability to collect their fees once the applicant is approved for the DTC and receives their refund.

Fee structures

It was acknowledged that using a pre-established fee structure would make it clear in advance how much the promoter’s services would cost. Multiple fee structures were proposed, and there was no clear agreement.

Specific fee suggestions included:

• a percentage of the refund on a contingency basis – allows individuals with limited income to benefit from the service without having to spend money up front as the fees are only charged if the individual qualifies for the DTC and gets a refund;
• a fixed dollar amount – base dollar amount plus an additional amount for prior year adjustments; and
• maximum hourly rates – professionals should be permitted to charge fees according to the standard hourly rates of their professions.

Maximum fee

Concern was expressed that some promoters were charging too high fees to support the DTC application process, and many options for the maximum fee were proposed:

• a percentage based fee structure ranging from 1 to 35% of the generated tax refund:
  • many felt current rates (20-35%) are too high;
  • others felt current rates are appropriate and the market would regulate itself;
• a maximum fee based on the already known and established Tax Rebate Discounting Act (TRDA) with a maximum fee of 15% on the individual’s first $300 of income tax refund and 5% on anything above $300;
• fixed fee options ranging from no fee to $1,000 when claiming the full 10 past years’ worth of credits;
• combinations such as an up-front fixed fee of $10 to $300, plus another amount of $25 to $75 for each tax year amended;
• maximum hourly rates ranging from $35 to $130 for professionals such as medical practitioners, accountants, lawyers, etc.

Reporting exemptions

The reporting rules are a key element of the DTCPRA compliance framework. Promoters that charge more than the set maximum fee will be subject to a penalty of $1,000 plus the amount charged in excess of the maximum fee. In order to encourage voluntary compliance and reduce administrative costs to the government, those overcharging are required to self-report to the CRA. Failure to report to the CRA may result in an additional fine of up to $25,000.

The regulations provide the option to free certain promoters from this reporting rule. An exempt promoter will still be liable for penalties, but may not be fined for failing to report the overcharge to the CRA.

Through the consultations, feedback was wanted on whether or not any promoters should be freed from the reporting rule; however, many participants thought the exemption applied to the maximum fee the promoter could charge, not just the reporting requirement.

It was often mentioned that medical practitioners should be freed from the reporting rule as the Income Tax Act requires them to certify the taxpayer’s impairment on the DTC certificate, they are regulated by their own governing bodies and most do not charge their patient for certifying the form.

Comments about freedoms from the reporting rule for other DTC requests included:

• no one should be exempt from the reporting rules
• professionals who depend on a federal or provincial governing body, such as accountants, lawyers and medical practitioners, should be free from the reporting rules as they are already regulated by the rules of their profession
• tax preparers who provide tax services and advice on a complete range of topics and who charge an hourly rate or fixed fee for their services should be exempt
• promoters who are members of the new Association of Canadian Disability Benefits Professionals should be free from the reporting rules as members must follow the code of ethics and rules established by the association

What we have done 

Based on the feedback received from Canadians during the 2014 consultations, the CRA took concrete actions to simplify the DTC application and improve DTC communications.

Simplified and more user friendly application form:

• The DTC certificate (Form T2201) has been simplified and shortened from 12 pages to six.
• The new form includes the option to request automatic reassessments for prior years for their own disability claims and for dependents under the age of 18.
• The CRA guide for disability related credits and deductions (RC4064) has been revised. A new approach was piloted to integrate instructions with visual pictures of the form T2201 directly into the guide.

Simplified application process:

• For the 2016 tax season, taxpayers and their representatives are able to electronically file a return that has a claim for the DTC even if there is no disability information on file.
• Letters that are sent to medical practitioners to request additional information are clearer, and they now have more time to return documents to the CRA (45 days instead of 30 days).
• Supporting documentation requested by the CRA can now be submitted electronically through MyAccount.

Improved communications:

• Clearer and more comprehensive information about the DTC and how to apply is available on the CRA website and through federal, provincial and community partners such as Employment and Social Development Canada (ESDC), Service Canada (SC), and various national medical practitioners associations.
• The CRA website now has a short video explaining the DTC and the simple application process.
• The ease of applying for the DTC was also promoted using social media including tweets, Facebook posts and carousel images.

We have taken a number of steps to improve the DTC application process and communication products, and will continue to do so to facilitate Canadians’ access to the DTC.

The feedback received will also serve greatly in drafting regulations under the new DTCPRA which are expected to be published in The Canada Gazette in 2016.

Conclusion

The CRA considers the feedback received from approximately 900 Canadians through the DTC public consultations to be very valuable in its ongoing efforts to simplify and enhance the administration of this program. While the feedback varied immensely from one individual, association, business or professional to another, the input received will be of great help in developing options for the maximum fee and the reporting exemption.

The CRA will continue its efforts to constantly improve the service it offers to Canadians by addressing the items that can be acted on in the short term and give due consideration to other items as part of our long term strategy. The CRA is committed to considering the feedback received through the public consultations in an effort to simplify the DTC application process and enhance communication with Canadians.