I have been deemed eligible for the DTC, which will be dated back to 2014. I am awaiting further details. How will this impact my LTD claim (if file is not closed-my 2 year mark is in less than 1 month)? Thanks
This will have no impact on your disability claim from the insurance company’s perspective. So if they were included to cut off your payments, then they would still go ahead and do this. It can be helpful in the appeal process because it shows your doctor believes you have a severe disability. It’s more important what your doctor is saying about your medical condition and disability as opposed to the fact that you have been approved for the DTC.
Is the insurance company entitled to the DTC funds?
No, I have never seen a situation where refunds you get from the disability tax credit are deductible by the insurance company. What the insurance company can deduct is set out in each insurance policy. It is different from case to case because all insurance policies are slightly different.
I am not clear re your answer. Does this mean the insurance company possibly/probably will take the DTC monies? If so, why bother to apply for it? Thanks
Unfortunately most answers for disability insurance are - it depends. This is because what can and cannot be deducted varies from situation to situation depending on the specific wording of your insurance plan. You would need to get a copy of your insurance policy and have it reviewed by a lawyer. I cannot imagine the DTC income would be deductible but cannot say for sure in your case.
DTC isn’t income. Its a tax credit, basically a reduction in the amount of taxes you pay in the year. So the insurance company can’t touch it.
For 95% of the time I agree with Steve, but unfortunately I don’t believe it is that black and white.
If you win DTC you will get a retroactive payment from Revenue Canada that will be a refund on your past taxes paid. I can envision a scenario where an insurance company may deem some the retroactive payment from Revenue Canada to be “income” for the purposes of the insurance policy.
We are not talking “income” as a dictionary or common definition, it will be income as defined by your specific insurance policy. This is why it is dangerous to make broad statements without going over your policy with a fine tooth comb.
How could the insurer claim a deduction? It could happen if you were earning income in past years at the same time you were receiving LTD payments, and the LTD was applying a “net” income offset. So, if the retroactive payment form Revenue Canada causes your net income to rise during those past years when you were receiving LTD payments, then the LTD insurer may seek a deduction for those past years of LTD paid. They would claim to have “overpaid” you because the DTC would cause your net income to rise in those past years, so they seek a repayment for those past years.
I am not saying this situation would apply to you. In fact, I thnk it is very unlikely, but you were probably not working during those years when you were getting LTD. However, this one example of how some of the retro DTC payment could impact disability payments.
You should should still apply for the DTC. I think it is very unlikely that what I have described above would apply to you. But even if it did, you would only have to pay over some of the retroactive payment and you would keep the rest of it, all benefits related to the DTC going forward.
The most important thing is that you tell in the insurance company that you have applied for the DTC, and if you are approved tell them the amount of any retroactive payment you get form Revenue Canada.
What if you apply and transfer the credit to your spouse or other qualifying family member.
Does the insurance provider need to know about bond and grand received while on ltd?
no they do not need to be advised.
I spoke to the CRA and they said that the insurance company cannot deduct DTC this because it is not income.
On another note - David, you look familiar. I am also an OT and graduated from Western as a mature student (also have an MEd. in counselling psychology) and unfortunately contracted a rare disease which suddenly thru me out of my career. So your information and input from others is really helpful. I also wondered if you have any thoughts re: my question around whether I can stop my insurance vs having them take my severance (if I get it - HR said yes if I am off for over 2 years and unable to return to work). Is this even possible. This is still in the ifs but I just wondered as I try to plan my life over the next few months.
I was re-reading your response with regard to the insurer collecting some retro payments re: DTC. If they state that it made your income go up, would they not have to then pay extra retro because they have to pay 60% of your income?
Maybe I am misinterpreting this - seems confusing.
I was initially diagnosed in about 2007 and it went into “remission” but still there (still working) and then it was reactivated in July 2014 and I was diagnosed in approx Jan 2015 with significant worsening of symptoms (ongoing) and off work Feb 18, 2016. Did not collect LTD until July 2016, If approved for DTC, I am not sure whether they will cover me from initial diagnosis in 2007 or when it was reactivated and spread to some other vital organs in 2015. They told me that they look at when I was diagnosed and would provide retro even if I was still working at the time. So am still wondering if they would take some of this refund. CRA told me that the insurer could not have access to this because it is not income so I am confused. - Rupert
See if your insurance policy deducts severance pay. Mine doesn’t. Every policy is different.
Your policy outlines the amount you’ll receive if you happen to apply for LTD. It is based on your salary at the time of signing up for the insurance. I doubt it is going to change. It hasn’t in mine despite of DTC, grant, bond or anything else.
They can go up to 10 years back with DTC.
If your doctor says your condition started in 2007 then CRA can approve DTC from 2007.
DTC is not an income. It is a non-refundable tax credit. For example, if you are approved from 2007 to 2017 then you can have your taxes adjusted up to 10 years back. Meaning some of your previously paid taxes will be returned back to you by CRA. Technically it won’t affect your prior or current income in any way. Also you won’t have to report DTC refund on your current tax return.
But you always have to read your policy. You never know, there can be some “odd” clauses hidden in there.
The above info is based on my experience with LTD and DTC.
Thanks so much for your reply and helpful information. So David mentioned that DTC should be reported to the insurer - is that really necessary since it is not income? My insurer states that my income will be reduced by CPP-D, if I get a severance, vacation pay, retirement pension, disability and income replacement benefits payable under any government plan (excludes EI), disability benefits under any other group, association or franchise insurance plan Does DTC fit into this?
No-its a tax credit to reduce your taxes or you can transfer to a family member who cares for you to reduce their taxes payable.
However, if you are not taxed on your insurance benefits and then have the CPP-D offset, which is taxed. That situation could result in you arguing that the CPP-D should be offset by the net after tax amount… Maybe that is why the tax credit should be disclosed?
You are welcome
You can always tell your insurer about DTC refund. It won’t be on your tax return. What is the other way they can have a knowledge of it?
I don’t think DTC is considered a “benefit” per se. It is a refund of taxes you paid from the income that you reported in the past (in case of backpayments).
You can always talk to your case manager if you are hesitant. I wouldn’t mention the amount received unless they insist as it can be pretty high. They can get anxious
File my own taxes.
I would really be grateful for any assistance someone may be able to provide with this one…i was a federal employee in an indeterminate position who developed a chronic back problem. I’ve had 4 surgeries that left me with screws, rods and a bone graph and still I can barely function. I was put on leave without pay, transferred to short term disability and then LTD.
I spent nearly 8 years completely bedridden while doctors passed on trying to help me until one finally tried to. I was heavily medicated and not in a right state of mind given that. My employer had me evaluated with Health Canada who deemed me completely unfit to work so I was retired due to medical reasons. The minute that passed my employer terminated my position and left me on LTD without any medical or dental coverage and my payments were diminished by more than half rendering me unable to support myself. So I had to move in with family for help. The CRA came back on me for taxes and seized my bank account and LTD payment. I had the taxes filed, filled out their expense forms and sent them 6 months of bank statements at their request after being accused of working under the table or making money illegally. Now they have completely locked me out of my account and I can’t pay my rent or bills and they took my food money at the beginning of this month. So what can someone in my position do given all that?!
Did they give you a reason why your LTD payments were reduced?
You should call CRA and try to work things out. There must be a reason why they think you made money under the table. Did you make money on the internet or any other way? Rented on airbnb or craigslist?
If you provided any service to anyone. That person could submit it as an expense on their tax return (with your name and address on it).
If you have nothing to do with it then you should check your credit report. Identity theft is another possibility. Someone could use you SIN.
They won’t let you go until you pay the taxes owed and penalties. You can ask CRA to let you pay in installments. They usually allow that.
When you sort things out with CRA you should apply for CPP-D and DTC. You’ll most probably get it.
Also check other disability assistance programs in your area.
I am completely unable to work so no. I haven’t made any other form of income and only receive my LTD. They diminished my payments stating that what I now receive would be the equivalent if I had gotten CPP Disability which I did apply for and was transferred to the QPP program and denied. As far as I can see from the research I’ve done they legally cannot take more than 15% if anything off someone a d they froze me out of my account completely. I had to move in with my sister who rented a place to accommodate me which maintaining the residence is contingent upon my portion as well as here given she’s a working class person. With what little I do receive from my LTD, it doesn’t allow me anything for clothing allowance, transportation allowance, incidentals or a social life of any kind. As they say every cent counts. Given all that a d the fact that I still can’t function on any kind of stable level this places me in a very difficult position. I realize that things should gotten done a d i probably wouldn’t be in this mess had i done so but as I’ve said…i was bedridden completely for nearly 8 years waiting for a neurosurgeon to take my case and was heavily medicated so my state of mind wouldn’t have permitted me to think clearly. Excruciating pain that never stops and heavy does of multiple narcotics doesn’t exactly go hand in hand with clear thinking