Service Improvement Request — Delays impacting persons with disabilities

Background

The disability tax credit (DTC) is a critical non-refundable tax credit that reduces income tax that people living with disabilities or their supporting family members may have to pay. If someone is eligible for the DTC, they, or their supporting family member, can request that the credit be applied retroactively for previous tax years, up to 10 years.

Despite its importance, our Office has received complaints about delays and communication gaps related to the CRA’s processing of DTC applications (Form T2201) and related T1 adjustments. As well, the CRA has shared publicly about the delays in processing T1 adjustments.

Important consideration

Fairness is not always simple and it does not always mean that everyone gets the exact same thing. There are many situations, relationships and events that come into play. Sometimes generally accepted principles of fairness will apply; sometimes the law will apply. Although there is no single answer, there are some basic principles and practices that can help to describe fairness^{Footnote 1} .

Ombudsman Saskatchewan

Issue

On Form T2201, Disability Tax Credit Certificate, taxpayers may request that the CRA apply the DTC to previous tax returns for all applicable years. These adjustment requests (T1-ADJs) often result in significant refunds. However, we have heard from many taxpayers, as well as the CRA, that it is taking up to 50 weeks to process T1-ADJs, 30 weeks longer than the service standard and 48 weeks longer than straightforward requests. These long timelines can be a result of the CRA considering some T1-ADJ complex.^{Footnote 2} The complexity of an adjustment can stem from numerous considerations, including changes related to multiple tax returns or tax years beyond the normal 3-year reassessment period. The CRA also indicates it can be due to an individual’s specific situation or the limitations of the systems it uses to process the adjustment. This likely has caused financial strain for taxpayers who were relying on these refunds to offset some of the costs related to their impairment.^{Footnote 3}

Currently, it is taking the CRA up to 15 weeks to process Form T2201, 7 weeks longer than the service standard. Once approved, taxpayers may have to wait up to an additional 50 weeks for their T1-ADJs to be processed if the CRA considers the adjustment complex. That said, the CRA indicates 60% of T1-ADJs are processed immediately and the remainder can take anywhere from an additional 16 to 50 weeks for their T1-ADJs to be processed.

Although taxpayers may be aware of the processing time for Form T2201, many taxpayers who reach out to our Office are not aware of the additional processing time for the T1-ADJs until they contact the CRA. Neither Form T2201 nor the digital form include information about this additional processing time; as a result, many taxpayers could misinterpret that everything will be done within the 15 weeks.

Currently, if a taxpayer requested the T1-ADJs for previous tax years on Form T2201, the CRA does not prioritize these requests, even after the Form T2201 is approved. These requests go through the CRA’s standard process of First In, First Out (FIFO). The CRA informed us these requests used to be prioritized, up until 2024, but with mounting inventories, it had to return to processing them using its standard process: FIFO.

In the CRA’s response to our previous report, Sub-Standard, which focused on delays and lack of transparency in the CRA’s processing of individual income tax and benefit returns and adjustment requests, it indicated that “[the] first-in, first out method is predominantly used by the CRA in order to maintain fairness and efficiency in processing.”

This means that a taxpayer with a disability, a vulnerable person, must wait yet again, even after they may have already waited 15 weeks for their DTC to be approved. Taxpayers receive a letter from the CRA once their application has been approved explaining that their request for T1-ADJs has been forwarded to the appropriate area within the CRA and explaining the current processing times. However, the lack of clarity regarding the ever-changing processing times likely causes anxiety and frustration for taxpayers.