Tax consultants who charge severely disabled Canadians up to a 40% fee to collect what's rightfully owing to them may soon face restrictions on how much they can charge clients for completing the disability tax credit application forms.
A private member's bill scheduled to receive second reading in the House of Commons Monday would limit the fees that can be charged by third-party consultants to complete Form T2201, the "Disability Tax Credit Certificate," which must also be certified by a qualified medical practitioner before being sent to the Canada Revenue Agency for approval.
Under the Income Tax Act, the DTC is available to people with a "severe and prolonged impairment in physical or mental functions." Eligible individuals can claim both federal and provincial credits. For 2013, the federal credit alone is worth $1,155.
In 2005, tax changes were introduced that made the collection of the DTC retroactive 10 years, which led to a variety of tax consultants opening up shop offering to help disabled Canadians obtain 10 years' worth of DTCs in return for a fee. These firms lure potential applicants by promising tens of thousands of dollars in tax credits.
Bill C-462, "an act restricting the fees charged by promoters of the disability tax credit," was first introduced in the House last fall by MP Cheryl Gallant of Renfrew-Nipissing-Pembroke riding.
Ms. Gallant said in an interview that she became aware of this issue when one DTC consulting firm began targeting soldiers in her riding, encouraging them to apply based on post-traumatic stress disorder and charging fees contingent on a percentage of government money collected.
"There is no limit whatsoever on the fee they can charge right now," says Ms. Gallant. Her goal in introducing the bill was "so that the people who the tax credit is intended for can reap most of the benefits."