LTD retro pay taxes and medical expenses

Hi, I trying to get my head around a few things:

1- I have been looking at the t1198 form but I want to make sure I’m understanding this correctly. It seems I have to claim all my retro lump-sum pay in the year I get it, but because it is for 2+ years of wage-loss I can request that they tax me as if it was split over the previous years. This will keep me in a lower tax bracket, is that right? Is there something else I need to be doing?

2- CRA has denied us nearly $2000 in “behind the counter” pharmacy receipts. Now these receipts are not for doctor prescribed drugs but they are for compounded substances that are not allowed to be legally sold over the counter. We must have a consult with the pharmacist, he makes it and we are provided with a properly signed pharmacy receipt. The CRA continues to insist that these receipts are for “over the counter” supplements but that is not at all true. Our pharmacist has told us a case was won a few years back but hiring a lawyer is a lot more expensive than paying back the taxes. Does anyone know where a private citizen can access precedents? If a case was won there should be a public record somewhere, right? I just need something I can send CRA to help them understand these are not over the counter supplements.

If anyone out there has any experience in this area and can point me in the right direction it would be greatly appreciated.

  1. You can split the back payment over the 2 years it was for but I think you ask CRA to do it. I would phone CRA.

  2. I don’t know how to find a precedent on your own. Is the compound for 2 drugs you have prescriptions for? Maybe a community legal clinic.


I will call CRA. Thank you.

RE: the pharmacy receipts. I did try our local legal clinic but they said they don’t provide support for this type of thing and re-directed me to a private law firm who really isn’t interested in taking it on. We do not have prescriptions because they are not pharmaceuticals but they are substances that are not available over the counter like homocysteine formulation to prevent blood clotting, cholesterol reducing compounds, etc. All of these things need to be purchased through our pharmacist because he makes them specifically according to what the individuals in our family need, factoring in health conditions and other medications.

Pharmacists are included in the Canada Health Act as the drug therapy experts. I pulled this from the NAPRA website:

“While pharmacists are still responsible for managing the overall pharmacy environment and overseeing dispensing, they now focus more on reviewing prescriptions for therapeutic appropriateness, performing medication reconciliation and medication reviews, developing care plans and monitoring patients. The care plan is often focused on taking steps to resolve or prevent drug-related or health-related problems. Depending on the province or territory, the pharmacist may accomplish this by performing expanded scope activities such as adaptation of prescriptions, prescribing for minor ailments, ordering and/or interpreting laboratory tests and administering drugs, including injections for immunization or other purposes.”

This is precisely what our pharmacist does. My challenge is getting CRA to listen and believe us that it is not over the counter. Pharmacists are listed as an eligible medical expense on the CRA list. I’m frustrated because I have all the information I need to prove it to be true but the way the system is set up we just get standardized letters saying “over the counter drugs are not eligible”. Can I just represent myself and take it to a judge?

You need to send the T1198 (QRLSP) form in with your return and ask that they do a special tax calculation. Basically they calculate what you would be taxed for 2018 had the retro pay been allocated to the correct years, and if it lowers your tax payable for 2018 (it usually does) they will use that to your benefit for your return. Unfortunately we can’t file online because of this (I’m in the same position).

The components of the compound are each over the counter drugs but when combined it is not over the counter?
Can you appeal the CRA ruling?
Keep looking. :slight_smile:
Maybe the pharmacist can help.

The T1198 is the form that spreads the lump sum payment amount over 2 or more years. The T1198 will show what amount should be applied to each tax year, there is nothing else to request. You will receive a T4A to go with the T1198 and the T4A will show the gross amount that is spread over 2 or more years in the T1198. You should seek advice from a tax specialist.

David Brannen

Disability Lawyer with Resolute Legal

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In my case I filed online and the calculations were done automatically. I had gotten very conflicting advice and am lucky it worked out. I called cra numerous times.

I’m not sure this is what you are looking for but it is a database of legal cases (but not specifically for taxes).

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RaptorsFan, thank you! That link is very helpful.