Charity abused disability tax credit program: CRA

Canada’s largest tax company for the disabled had links to a controversial charity that once helped obtain disability tax credits for some people who did not qualify, according to Canada Revenue Agency documents obtained by CBC News.

The CRA documents reveal that the charity, Canadian Ptach Society Inc., was "endeavouring to make peoples’ illnesses fit the criteria" of a special tax credit intended for disabled Canadians with taxable income. The CRA alleges the charity charged fees and inserted wording on application forms that are supposed to be completed by a physician or licensed practitioner.  

The director of the charity then went on to establish a business called the National Benefit Authority, which advertises on its website "we can collect for you up to $35,000 from the Canadian government" in retroactive tax refunds.

At issue for the CRA is the disability tax credit, which is intended to give a financial break to taxpayers with severe and prolonged mental and/or physical impairments. (If the disabled person has no taxable income, a family member may apply for the credit.) To be eligible, the disabled person’s medical professional must complete the medical application forms.

The CRA documents reveal that the Toronto-based charity Canadian Ptach Society, whose status the agency revoked in January 2010, was established two decades ago to offer scholarships and assistance to disabled Jewish youth and their families.

Charged clients for advice

By 2007, the CRA alleges, the charity was actually operating as a business that charged clients for advice on how to fill out forms; assigned 15 per cent and 20 per cent commissions on tax refunds, then claimed them as "donations" to the charity; and helped clients claim the disability tax credit for conditions, such as migraines, anorexia, attention deficit disorder and common sleep apnea.

"It is our opinion," wrote the CRA, "that a number of items that the Organization [charity] claims as legitimate disabilities with respect to the disability tax credit do not meet the condition found in Section 118.3 of the Income Tax Act for severe and prolonged mental and physical impairment."

According to the CRA’s assessment: "This strategy is used to generate disability tax credits for individuals who do not actually meet the criteria. It appears that the motivation is not to assist people who are disabled in the ways set out … but to assist T4 income earners to decrease tax payable for a commission."

"Participants in this program are primarily motivated by the desire to profit from the disability tax incentives and also from the donation tax credit for the fee paid to the Charity, rather than a desire to enrich the Charity."

The CRA also alleged that it appeared the charity "inserts the wording on the disability tax certificate so as to ensure that its clients are approved for the disability tax credit."

Claims increased

Although the CRA won’t reveal why it audited the charity — and won’t comment on its findings — its report indicates that claims for disability tax credits from Ontarians increased, particularly requests for tax refunds, going back to 1998. The CRA attributed the increase to the charity’s "aggressive marketing of its tax strategy in the Toronto area," which it said was undermining the integrity of the credit.

"The organization Canadian Ptach was operating outside of its registered mandate and I respect Canada Revenue [Agency] decision that it was operating outside of its mandate," said former director Akiva Medjuck, who is now president of Toronto-based National Benefit Authority.

"No question about it: Our goal was to, is to, put money into the disabled Canadians’ pockets who deserve the money," Medjuck said. "And I don’t know about you, but I wasn’t prepared to lose money doing that. And no one was offering to pay me to bring this information to Canadians, which is why we charged the fee. So the fee was charged and we did fantastic work."

Medjuck admits the charity did insert wording on the disability tax credit application, but not to make disabilities fit the criteria of the credit or to sway the medical practitioners who were to sign the form. He said the wording was meant to clearly explain the disabilities of their clients.

"What the Canadian Ptach Society did was speak to the clients and understand from the clients what the effects of impairment are," Medjuck insisted. "And at that time, those were the effects of impairment that the client reported, [and] were placed on the disability tax credit. And the doctor looked at that. And if the doctor signed that disability tax credit, it means that they agree with the patient’s report of what the effects of impairment are."

End of charity, beginning of business

Medjuck says the charity began winding down in mid-2008 when it realized it was operating outside the bounds of a charity. It was around this time that the CRA audit began.

But by then, a for-profit corporation called the National Benefit Authority Corp. —  a Toronto-based firm headed by Medjuck and including Canadian Ptach Society executive Mark Neustadt  — was up and running. It came into existence in November 2008, according to Medjuck and documents from Ontario’s Ministry of Government Services.

"Once the organization ceased to exist, that is when I created the National Benefit Authority which is a for-profit corporation," Medjuck said. "And I am assisting Canadians with disabilities to get the benefits of disability status."

Like the former charity, the National Benefit Authority offers expertise in the disability tax credit, whose criteria were broadened in 2005, thus theoretically making hundreds of thousands more Canadians eligible. 

The CRA also made the credit retroactive for 10 years, allowing for the possibility of hefty refunds for qualified candidates who could prove their disabilities were long-term. The disability tax credit can be filled out by individuals and their doctors without any professional assistance. 

However, businesses, sometimes tiny, began popping up across the country promising to help people secure the disability tax credit — and cash refunds through refiling of taxes —  for fees ranging anywhere from a flat fee of $295 to commissions of 30 per cent on refunds.  

CRA statistics indicate that from 2004 to 2008, total DTC claims for disabled taxpayers, caregivers and dependants jumped to 652,630 from 506,440. In 2009, for example, more than $700 million was refunded or credited to taxpayers, according to CRA.

With its slick website flashing stacks of $100 bills, tickertape of disabilities and chatty testimonials, the National Benefit Authority is by far the largest tax service for the disabled.   

The company boasts it helps "Canadians with disabilities receive the money they deserve from the Canadian government."

It charges a $25 application fee and a 30 per cent commission on any tax refunds it secures for clients. It  promises to help clients navigate Canada’s complicated tax system to "hurdle past any and all bottlenecks."  

The NBA has grown to 150 employees and has a call centre, case verification department, benefits specialist department and tax department, Medjuck says. The company markets aggressively through its website and on talk radio throughout the Greater Toronto Area. It offers expertise on 91 disabilities it believes could qualify for the disability tax credit. 

"What we do, simply, is we let people know, clearly, that there are a lot of conditions out there that are eligible that they don’t know about. And the rest is generally left in the hands of the doctor," Medjuck said.

"We can’t fit anything into anywhere that’s not appropriate but we definitely encourage people to go to their doctors, ask their doctors to fill out the forms, because look at the results. The results don’t lie. You know, there are tens of thousands of people getting this money that weren’t getting it before and that’s because they didn’t think they qualified."

Former NBA client Bryan Sargeant told CBC News he reached out to NBA in 2009. 

"They sent some forms that had to be filled out stating what your disabilities were, like an application form," the B.C. man said. "It came in a pre-addressed stamped envelope and I mailed that off. Then they sent back some forms for the doctor to fill out. And they had little sticky arrows on them, everything was filled in. The doctor just had to sign it, date it and stamp it. It was very, very good."

Medjuck insists that his company is not telling doctors how to fill in the forms.

"But we will work with the doctors and the stakeholders involved to ensure that those comments — those specific comments that the CRA is looking for — are adequately presented on the application. We want to ensure, we realize very clearly that there are hundreds of thousands of clients who are calling us for assistance in trying to obtain this money that they are most absolutely entitled to."

"We’re not the ones … you know … qualifying these forms. The doctors are and CRA is reviewing," Medjuck said.

Medjuck says his company does not have physicians on staff who are signing off on disability tax credit applications and insists he’s not running a tax credit mill. However, he did tell CBC News his company does make referrals for clients without doctors.

"There are a number of doctors that have made themselves available and we’ll refer them to one of them," Medjuck said. "The National Benefit Authority has a policy that any of our clients that are not able to pay their doctors the fee to fill out the forms, we will actually fund those fees for all of the doctors and the client will reimburse us only if they are successful in the claims. And very simply, the purpose of this is to ensure there are no roadblocks involved in actually accessing these benefits."

Medjuck says a psychologist once charged NBA $1,200 to fill the 12-page paperwork, which NBA paid.

NBA's eligibility questionnaire

There are questions as to how the NBA determines whether a client should try to proceed with a claim for the disability tax credit. CBC News has obtained the package that the National Benefit Authority sends prospective clients. The package contains a questionnaire "which will enable us to assess your eligibility and present your case to the Canada Revenue Agency."

This questionnaire asks clients to check off their conditions from a list of a variety of conditions, which helps NBA staff assess whether the client may be eligible for the disability tax credit. These include:

• "Very low self-confidence and self-esteem."      
• "Requires extra time to understand verbal instructions."   
• "Require(d) regular tutoring."   
• "Poor time management." 
• "Very disorganized, both mentally (e.g. disorganized thoughts) and physically (e.g. lose items on a regular basis."

"One of the challenges with the whole process is that the disability tax credit is being signed by the client’s doctor — right? — who’s obviously gone to medical school for many years and is versed in disabilities and diagnoses etc. and effects of impairment," Medjuck said. " The challenge is that when this form gets to Revenue Canada, it’s not being reviewed by medical personnel. It’s being reviewed by paper-pushers.

"In theory, there’s that lack of balance between the expertise of the people who are filling out the forms and the expertise of the people reviewing the forms."

As to the 30 per cent commission fee, Medjuck is unapologetic.

"It’s important for the company to make a profit. It’s important for us to be able to pay our employees to continue doing the work we do. And no question about it, we currently do run a for-profit company. That said, we are helping tens of thousands of Canadians," he said.

"I think most people would be jealous of my position — to be able to have a company that’s able to be in the positive world doing amazing work and bringing this information to people. If there wasn’t a need for this service, then you know, we wouldn’t be talking right now. But obviously, obviously there’s a huge need for this."

When asked whether his company is being audited by the CRA, Medjuck responded in the negative. However, he confirmed the CRA has increasingly been sending letters to physicians, asking them additional questions to justify past applications for the disability tax credit.

"CRA wants to ensure that the forms are being completed by the doctor and that’s fantastic," Medjuck said. "The CRA’s mandate is to protect the taxpayer and they do a fantastic job at that."

Email investigations@cbc.ca if you have any more information on this or other stories.