Unreported Income and Disability Benefits Claims

Unreported income usually results from a failure to file tax returns or declare income to the Canada Revenue Agency. Breaking down disability benefits into three types can help to illustrate where unreported income can become a problem: 1. For individual disability policies for employees, there is usually a prescribed monthly benefit; 2. Group policies for employees are often passed on insurable earnings as reported or paid by an employer; and 3. For self-employed individuals, disability policies are usually based on the earnings they established when purchasing the policy, and many policies can increase as income grows. In cases where there is a prescribed monthly benefit, or an employer’s records should show your income, there is less concern around unreported income. However, unreported income can become an area of contention for self-employed individuals, especially when their past income is hugely different from their current income.

When is Unreported Income Scrutinized?

Unreported income will be investigated by the insurance company:

There are three main circumstances when the insurance company will investigate unreported earnings:

1. When dealing with partial or residual benefits;
2. For self-employed individuals who have incorporated; and
3. Being in an industry in decline.

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Table of contents

What are partial or residual disability benefits?

Residual disability benefits deal with paying a specific percentage of your insured earnings. These benefits are payable when a disability lasts up to or over the assessment period and prevents a person from being fully employed. These benefits are reduced if the person’s current income exceeds their pre-disability income.

Partial disability provides coverage for people who qualify for disability but can work in a reduced capacity. They are generally based on a percentage of lost income.

So, for partial and residual disability benefits, it is important to establish both your pre-disability and current incomes. In this situation, if either of your incomes had unreported amounts, you may find yourself needing to provide evidence to support the amounts you are claiming.

Corporate structures

For self-employed individuals who have incorporated, their earnings may come under scrutiny if an insurance provider believes that they may have split their income to maximize their residual or partial benefits under their policy.

Industry in Decline

There can also be a good deal of scrutiny if you are self-employed in an industry that is currently in decline. In these cases, insurance providers may jump at the chance to say that your earnings would also be low, even if your own earnings were not actually declining alongside your industry.

How to Provide Evidence of Unreported Income

In general, the facts of your situation will ultimately decide whether your unreported income is considered. Factors that may be considered include:

● The nature of your unreported work;
● Your credibility; and
● Evidence you can provide of your income.

There are many types of evidence you can provide for your unreported income. Ultimately, which forms of evidence are available to you will depend on the nature of your unreported work.

Some examples of evidence include:

● Deposits made to your bank account;
● Online transactions if you are an online seller;
● Pay stubs;
● Statistical evidence of average earnings; and
● Having others in the same business testify for you.

How Can Freedom Disability Lawyers Help?

At Freedom Disability Lawyers we will act on your behalf to advocate for you in your disability claim in Toronto, Ontario and the rest of Canada. To book your free consultation, call toll-free:1-833-633-3585 or jeff@fdlawyers.ca, and tell us more about your disability claim and will tell you how we can help you.

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