Overpaying to apply for your Disability Tax Credits in Canada?
Not too long ago, I received a phone call from one of my clients. She is a very nice lady that had been disabled for quite sometime. However, she did not apply for the Disability Tax Credits over the years, and is currently looking into this. If the application is successfully approved, not only she could enjoy the benefits from having a Registered Disability Savings Plan, there could be potential tax refunds for her or her supporting family. This could result in substantial amount of money as CRA will back-date and review tax returns for up to 10 years or to the date of disability.
During the call, she indicated that she was recently contacted by a company, in which they claimed they could apply the disability benefits from the government for her. I immediately did some researches online and found that there are some middlemen in the industry that are charging surprisingly high fees for assisting with the application.
Below is an article I read from the Toronto Star. This is the headline:
“Agency charged woman $10,000 for tax claim she could have filed for free: Canadians with disabilities are losing thousands of dollars in government benefits to a middle man”.
It reveals the case that there is a middle-aged mother, who intended to apply the disability tax credit for her son with special needs, ended up responsible for paying not only the $25 application fee, but also 25 per cent of whatever she received from the Canada Revenue Agency. Yet, she received a total of $38,237.71 and handed over the required $10,037.41 to the middlemen.
Just to clarify, I’m in no position to comment in this case nor this company, as I do not know if there are other details that have not been revealed. However, most of my clients with pro-longed disability simply apply for the disability tax credit themselves and the paperwork involved does not seem that complicated. They fill out the T2201 application together with the doctor and mail that to the CRA. In conclusion, if you were hiring someone to apply for the disability tax credits for you, make sure you shop around and understand the fees and service you would expect.
In my client’s case, by applying the disability tax credit herself, if there’s no cost from the physician to fill out the forms, the only cost I could think of would the expense of a mailing stamp.