Are Canadians with Disabilities Tax Cheats?

February 10, 2019

One might wonder.

As far as I know, only tax cheats have to give back any ill-gotten gains.

And yet, our federal government is clawing back millions of dollars in contributions from thousands of Canadians with disabilities, who have opened up Registered Disability Savings Plans (RDSPs).

Why?

The CRA decided that their disabilities are no longer severe enough to qualify for the Disability Tax Credit (DTC) when they were asked to reapply for the tax credit.

Is this true?

Not according to their doctors.
Not according to the Auditor General of Canada.
Not according to the Senate of Canada.
Not according to the Tax Court of Canada.

Why are they denied the DTC?

We don’t always know since CRA is not required to provide a valid reason.

Does it pay to fight back when denied the DTC?

Yes. An average of 85% of the Objections filed with the Appeals Branch of CRA in recent years have been successful.

Can we fix this?

Yes. Get in touch with your Member of Parliament and ask him or her to help ensure that Canadians with disabilities do not lose government contributions to their RDSPs when they are denied the DTC.  

Quick Facts

• The RDSP was introduced in 2008 as a long-term, tax-sheltered savings plan to help Canadians with disabilities under 49 years of age and their families to save for future needs.
• The RDSP is managed by the Canada Revenue Agency (CRA) according to provisions of the Income Tax Act.
• Beneficiaries must be eligible for the Disability Tax Credit (DTC).
• Generous matching grants and bonds, as much as $4,500 each year, are made by Employment and Social Development Canada (ESDC).
• RDSPs can be opened in banks and other financial institutions.
• RDSPs are terminated if the individual no longer qualifies for the DTC or dies and all government contributions made in the previous 10 years are clawed back.
• More than $26 million has been withdrawn from RDSPs belonging to Canadians with disabilities since 2010.
• Investment earnings are taxable in the year that the RDSP is closed unlike Tax Free Savings Accounts (TFSA) where interest, dividends, and capital gains are not a tax liability.
  
  "How does the government justify creating a program to help those with disabilities and challenges, and then take back what they have given after the fact?  This is not only unfair, it is wrong, it is unjust...  Please do the right thing and fix this."  Colin of Peterborough

TAGS - DTC, CRA

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