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Legalese - March 10, 2005

Twelve tax tips for your 2005 return Part I

by Heidi Lazar-Meyn, Lawyer, and Harry Beatty, Barrister and solicitor

A column of general information and opinion on legal topics by the lawyers of Rural Legal Services, Box 359, Sharbot Lake, ON, K0H2P0, 613-279-3252, or 1-888-777-8916. This column is not intended to provide legal advice. You should contact a lawyer to determine your legal rights and obligations.

The news for tax year 2004 is Bill C-33, which if passed will change the Income Tax Act. The Bill includes the new Disability Supports Deduction (DSD), and will change the rules for the medical expenses tax credit. It is expected that the Bill will become law for the 2004 tax year, assuming that the current minority Liberal government stays in power.

1. Your 2004 income tax return must be postmarked or received by Canada Revenue Agency (CRA) before midnight on 2 May 2005 because 30 April falls on a Saturday. If you or your spouse or common-law partner is self-employed, the deadline for filing is extended to 15 June 2005, but the deadline for paying any taxes that you may owe remains 2 May.

If you expect to get a refund, it is best to file early, so you receive the refund as soon as possible. If you receive social assistance payments, and you get a letter saying that CRA is keeping your tax refund or GST rebate because of an overpayment, see the advice in the “ODSP Update” article in this issue of ARCH Alert. [i.e. contact Rural Legal Services at the numbers above]

You are able to file your tax return many different ways, including by filing a paper return. If you prepare your taxes yourself using a computer program, you can file it over the Internet. Some tax preparers also can assist you to file your taxes electronically. You may also be able to “telefile” your return by entering the information on a touchtone telephone. If you are unable to use a touchtone telephone because of a disability, you can get help in “telefiling” from CRA by calling 1.800.714.7257.

2. CRA’s website gives tax information for persons with disabilities. The address is http://www.cra-arc.gc.ca/disability. From there you can download a pamphlet called, “Information Concerning People With Disabilities” and CRA’s Interpretation Bulletin IT-519R2, "Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction (Consolidated)”.

CRA’s website also has other documents that may help you in preparing your taxes. The General Income Tax and Benefit Guide is available for pick-up at most post offices and CRA will mail it to you if you call 1.800.959.2221. If you prefer an alternate format, such as large print, audiocassette or e-text, you can download some forms and instructions at www.cra.gc.ca/alternate or you can order them by calling 1.800.267.1267.

For more information on other forms and publications that are available, you can download or order them from CRA’s website, www.cra.gc.ca, or call the General Enquiries number at 1.800.959.8281.

3. Persons who have simple returns and low incomes can get free help with completing their tax returns. For further information on the Community Volunteer Income Tax Program, call CRA's General Inquiries line at 1.800.959.8281. [in northern Frontenac call Northern Frontenac Services Corporation at 279-3151 and in northern Lennox and Addington call Land o’ Lakes Community Services at 336-8934]

4) Even if your income in 2005 was not taxable, you may want to file a return to prove that you are eligible for certain programs, such as the Guaranteed Income Supplement for seniors, or subsidized childcare. To get the Canada Child Tax Benefit or Child Disability Benefit you also have to file a return. If you are eligible for "refundable" tax credits, such as the GST credit or some provincial tax credits, you can get a refund even if you do not pay or owe any income tax.

For some of these programs it is necessary that both you and your spouse or common-law partner file a tax return to prove your family's eligibility. Contact the program itself for further information on its eligibility requirements.

5) The changes proposed in Budget 2005 will make many persons eligible for the DTC who did not meet the requirements before.  Therefore, it is important for all persons with disabilities who are not receiving the DTC to review these changes to see if they now qualify, even if CRA has turned your application down in the past.

To be eligible for the DTC under the present rules, you must have “a severe and prolonged mental or physical impairment” that causes you to be:

  • Blind or have partial vision,
  • Unable, or take an inordinate amount of time, to perform a basic activity of daily living, such as walking or “perceiving, thinking and remembering”, even with the use of assistive devices, medication, or therapy, or
  • Unable to perform basic activities of daily living without life-sustaining therapy.

Under the proposed changes to the ITA, persons would be eligible for the DTC if they have “one or more severe or prolonged impairments in physical or mental functions.”  This change of wording puts more emphasis on the actual physical and mental limitations that the impairments cause.

Other important changes are that:

  • Persons would be eligible for the DTC if they have “significant” restrictions in two or more activities of daily living, where the effect of all of these restrictions together is equivalent to having a “marked” restriction in one activity of daily living,
  •  “Perceiving, thinking and remembering” would be changed to “mental functions necessary for everyday life”, which include memory, adaptive functioning, and problem solving, goal setting and judgement, and
  • There would be new rules about how to count the time spent in therapy that is necessary to keep a person from having a marked restriction in functioning in an activity of daily living.

You can apply for the DTC using Form T2201.  This form must be filled out by a qualified health professional. Make sure that the health professional uses the 2005 version of the form, which includes the proposed changes.

A medical doctor can fill out the form for anyone who is applying for the DTC.  In addition, the following qualified health professionals can fill out the form for persons who have certain types of impairments:

  • optometrists:  visual impairments
  • speech-language pathologists:  speech impairments
  • audiologists:  hearing impairments
  • occupational therapists:  impairments in walking, feeding or dressing
  • physiotherapists: impairments in walking
  • psychologists:  impairments in perceiving, thinking or remembering

The parents of children who are younger than 18 at the end of the tax year can claim a supplement to the DTC. However, child care or attendant care expenses that anyone is claiming for that child may reduce the credit.

The DTC is a non-refundable credit so if your income is low you may not be able to use all of the credit yourself. If this is the case, you may be able to transfer all or part of the DTC to your spouse or common-law partner. The DTC also can be transferred to certain relatives who are supporting you. See the Guide for further information on transferring the DTC.

If you apply for the DTC when you file your return CRA may take a long time to process the return. You may be able to avoid this delay by applying for the DTC before you file your tax return. You can claim the DTC on your return even if you are waiting for CRA to approve your application.

6)  If you paid for certain expenses in order to work, attend a secondary school or post-secondary institution or do research, you may be able to claim the DSD, using Form T929. The DSD is available to anyone who has a disability, even if that person is not eligible for the DTC.

The present version of the ITA allows the DSD for the following expenses:

  • Persons with speech or hearing impairments can deduct the cost of sign-language interpretation services or real time captioning services.  They also can deduct the cost of teletypewriters, telephone ringing indicators or electronic speech synthesizers, if prescribed by a medical practitioner, and
  • Persons who are blind can deduct the cost of synthetic speech systems, Braille printers, large-print on-screen devices and optical scanners, if prescribed by a medical practitioner.

Also, if a medical practitioner certifies in writing that the expenses are necessary due to the impairment:

  • Persons with a mental or physical impairment can deduct the cost of full-time attendant care that is provided by an adult who is not their spouse or common-law partner; part-time attendant care, if they also are eligible for the DTC, and note-taking services, if the note-taker does them as a business,
  • Persons with a physical impairment can deduct the cost of voice recognition software,
  • Persons with a learning disability or a mental impairment can deduct the cost of tutoring services, if the tutor does them as a business, and is not related to the taxpayer, and
  • Persons with a perceptual disability can deduct the cost of talking textbooks used at a secondary school in Canada or at a post-secondary institution.
  • The proposed changes would allow the DSD for the cost of job coaching services if the job coach does them as a business, and a medical practitioner certifies in writing that the expenses are necessary due to the impairment.
In addition, all of the following expenses would be eligible for either the DSD or the METC:
  • Persons who are both blind and profoundly Deaf could deduct the cost of intervenor services, if the intervenor does them as a business, and
  • if a medical practitioner certifies in writing that the expenses are necessary due to the impairment,
  • Persons who are blind or who have a severe learning disability could deduct the cost  of devices that enable them to read print, and of reading services if the reader does them as a business,
  • Persons who have a speech impairment could deduct the cost of Bliss symbol boards or similar devices,
  • Persons who are blind could deduct the cost of Braille note-taking devices with keyboards, and
  • Persons who have a severe and prolonged impairment that markedly restricts their ability to use their arms or hands could deduct the cost of page-turner devices.             

If you have a choice of claiming an expense under the DSD or the METC, it usually will be better to claim it under the DSD but you should check whether this applies to your situation.

Part II
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