Persons with a disability and families who support persons with disabilities should be aware there is a revised RC4064 Medical and Disability-Related Information Guide and Disability Tax Credit Application Form T2201. Please ensure you have the current release when submitting an application.
RC4064 guide and form were released in mid January of 2007, early 2008 and again in early 2009. Look for a new release in early 2010 on the Canada Revenue Agency (CRA) website.
In 2008, Canada Revenue Agency also released a video based on this guide to explain in audio/visual format what’s in the guide. You can access this video release from my website on the home page.
This article will briefly discuss tax credits, EH&DB premiums, medical expenses, fairness, what else you should know and where to find more information.
Tax credits for families are explained in this new guide in a fresh new way. Much of this change came about because of consultation with the Disability Advisory Committee. This committee, of which I am a member, was established in 2005 and still meets monthly by informal teleconference to discuss ongoing initiatives. One of the ongoing projects is outreach to qualified medical practitioners through their conferences and events. Benefits administration staff made the effort to find events to attend and to explain the disability tax credit application process.
In addition to the RC4064 guide, there are several other ways to look for information about tax credits.
1. The General Tax Guide and a third, an Interpretation Bulletin, IT 513 Personal Tax Credits which discusses support and what that means in the Appendix.
2. TD1 lists most of the credits. The TD1 where you claim what tax credits is automatically applied when you submit the signed forms for federal and provincial tax credits to your payroll department. Note that tax credits can be transferrable where there is evidence of support.
3. T1213 is how you may be able to reduce the tax withheld at source (tax is withheld from your paycheque every pay period) for expenses and credits that aren’t so automatic. This may be because there are calculations that must be done and approval must be sought and obtained before payroll can process the reduction in withholding.
The TD1 and T1213 forms may allow you to keep more of your money during the year, making it possible to pay your bills and reduce debt during the year. The T1213 is used for example, in cases where you are paying support to a spouse or claiming unusual expenses such as attendant care that qualifies for disability support expense or for medical expenses.
Compare your tax return with your TD1 claim. Then compare the credits available for claim on a TD1 against what you can claim on your tax return. It may be possible to reduce your tax taken at source during the year by completing a T1213. Why give CRA your money only to have it refunded next April?
Now have a look at your paystub. Is there a deduction for EH&DB? That’s code for Extended Health and Dental Premiums. Also known as private health services plans; this particular type of insurance qualifies as a medical expense. Those premiums are expensive. If you claim those premiums plus the portion of your medical expenses not covered by insurance, (20% of drugs and chiropractic, and 50% of dental...everything over $200 on glasses) you may find you have a medical expense claim on the lower income spouse’s tax return.
Your T4 has Box 85, completion of which is optional, where your employer can record the payments for these insurance premiums. If both spouses have a plan and both have the plan premiums deducted they could claim the premiums for both on the lower income spouse’s return and it very well may exceed 3% of net income threshold which tops out at just under $2,000. Everything over that threshold is a claimable amount. There’s no ceiling on medical expenses. If you paid for them, claim them.
If you know that you paid premiums for an extended health plan such as Blue Cross or Standard Life through your paycheque and this box is not completed, ask your employer to write a letter disclosing the premiums paid.
Canada Revenue Agency website now lists medical expenses for all of the various medical expenses listed in the Income Tax Act in S. 118.2(2) and those under Regulation 5700 in both the RC4064 and on their website under “M”.
Medical expenses for glasses, dental, chiropractor, tummy tucks, face lifts, teeth whitening, everyone can claim those, well almost everyone. Quebec limited certain medical expenses several years ago in their budget.
Only some of the medical expenses require that you have been labelled as disabled or infirm. Most will however, require a prescription or certification by a qualified medical practitioner. The challenge is to document claims for complex items like medical travel or therapy where you require four different things, the disability tax credit, a prescription, someone who is qualified to administer the therapy and the receipt for the purchase of the therapy.
The challenge may be that in your province or territory there is no licensing for certain practitioners. There should be a list of who is licensed and which province or territory they are licensed in, but it isn’t available to the general public. An example is speech language pathologists who are not qualified medical practitioner in BC, NT, NU and YT.
If you didn’t know you could claim tax credits or medical expenses, it’s possible to request under the fairness rules to have your returns adjusted for the previous 10 years. It’s never straightforward and there are pitfalls, so ask a professional to assist you. There is an article on my website, Disability Tax Credit, Gold Mine or Minefield which explains more. You will find information about fairness on the CRA website.
What else should you know?
Disability insurance premiums paid by your employer will result in taxable income in the event of a claim. Premiums paid by deduction from your pay will result in tax free income in the event of a claim.
Employment standards are a provincial matter you should become familiar with if you hire caregivers in your home. Consider that caregivers or nannies are subject to applicable statutes regarding employment including rates of pay, statutory holidays, vacation pay, working conditions and hours of work as well as termination pay. If they live with you, it may be necessary to prepare a benefit calculation for the value of room and board.
Hiring caregivers and paying cash is a very uncomfortable topic. Canada is challenged by a huge underground economy where paying cash could be a huge liability to families if there is an accident or injury to a caregiver for hire. Your house insurance company may require you inform them of workers on your premises, refusing coverage in the event of a claim if full disclosure was not made prior to the claim. WCB and their team of lawyers will ensure that after you’ve settled with Employment Standards lawyers about minimum wage requirements, vacation pay and other benefits, that you are liable if you didn’t register an employer prior to a claim by the ‘employee’ who was happy to be self-employed until the injury or accident.
Where to get more tax information
All guides and forms are searchable by their form number on the Canada Revenue Agency website at www.cra-arc.gc.ca
Consider hosting or attending either a live or online webinar for a three hour in-depth look at how to “Pay less tax”. Time well spent.