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February 6, 2012

Claw-Back and Pick-Up

Reuel S. Amdur

More by this author...

Two terms that are useful in looking at the impact of social programs are claw-back and pick-up. Let's illustrate.

If a person receiving the Old Age Pension has revenue beyond a certain level, part of the Old Age Pension is clawed back.  Then there is the Guaranteed Income Supplement.  Richard Shillington made a splash in the media by pointing out that a significant number of those eligible were not doing the paperwork to get their GIS:  A failure to pick up.

There are several programs for the disabled that, even more than the GIS, are under the radar.  One is the Registered Disability Savings Plan (RDSP).  Eligibility for the plan is determined by two elements: financially, according to the amount of revenue received by the recipient, and medically, using the same certification document used for the Disability Tax Credit.  Both the RDSP and the Disability Tax Credit are characterized by significant lack of pick-up.

Various complications arise in the RDSP.  Those interested may order the booklet “Registered Disability Savings Plan: Helping People with Disabilities Save for the Future.”  To receive the booklet, call 1-800-622-6232.  The booklet is produced by Human Resources and Skills Development Canada (HRSDC).  HRSDC has enlisted the firm COMPAS to promote the program, and they can be reached at 1-877-488-2559.

As noted, there are other tax provisions for the disabled that are frequently missed–not picked up.  One is the aforementioned Disability Tax Credit, which can result in a non-refundable tax credit for the disabled person.  There is also a caregiver’s deduction available, and if the disabled person does not have tax room to use the Disability Tax Credit, the credit can be transferred to the caregiver. 

If a home requires modification to make it accessible for the disabled person, there is provision for partial deductibility on the income tax for the cost of the alterations.

All of these programs face a common difficulty: lack of pick-up. 

And it is not just the general public who are unaware about the various entitlements.  Many accountants and others who complete tax forms for people are also unaware.  These are the very people who need to insure pick-up. 

For that reason, the federal government should consider setting up seminars about federal programs providing financial advantages for the disabled, aimed at accountants and others providing tax services to the public.  Those completing the seminar program should then be given a certificate, and agencies and organizations in the disability community would then have a list of knowledgeable professionals to whom they could refer. 

As an aside, a knowledgeable professional is in this context more valuable than an income tax computer package.  The professional can dig for information that may not have occurred to the person using the package.

There are a couple overlooked problems that may confront utilization of the RDSP, relating to mental illness and to the spendthrift factor.  If a person is financially incompetent and has no trustee, the bank is unable to open an account for him.  And if in violation of regulations it does, there is no way in which to control the person’s use of the money in the RDSP.  This is a systemic issue that the government needs to address.

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