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Personal Tax Returns Insufficient for Self-Employed IRB Claim

March 20, 2024

The recent Licence Appeal Tribunal (LAT) decision, Ahmad v Economical Mutual Insurance (21-014296/AABS) reiterates that personal tax returns may not be sufficient evidence of pre-accident income when calculating Income Replacement Benefits (IRB).

In this claim, the applicant designated themselves as “self-employed” on the OCF-2 (Employer’s Confirmation Form).  Given this fact, the respondent requested the following financial documents in order to calculate the applicant’s IRB:

  • Election Form (OCF-10);
  • GST-HST Returns;
  • Personal Income Tax Returns with Notices of Assessments;
  • Corporate Income Tax Returns with Notices of Assessments;
  • Bank statements;
  • Expense records;
  • Financial Statements;
  • Sales and revenue records;
  • Collateral benefit file;
  • Social services file; and
  • Employment file.

These documents were crucial for accurately assessing the applicant’s pre-accident income, which would in turn, determine the amount of IRBs payable. For self-employed individuals, determining pre-accident income can be more complex than it is for salaried employees – due to the variability in income and the need to consider business expenses and revenues. This detailed financial information gives the insurer a comprehensive understanding of the applicant’s financial situation, ensuring the IRB calculation is fair and reflects the applicant’s actual income loss due to the accident.

After a period of non-compliance, the applicant eventually submitted their personal income tax returns for 2017 to 2021, however, the tribunal determined this to be inadequate. The tribunal emphasized the importance of receiving all the requested documents to properly assess the applicant’s claim, especially considering the complexities of self-employment.

As a result, the tribunal determined that the applicant had not met his onus of proving entitlement to an IRB.

Read the decision in full detail here: Ahmad v Economical Mutual Insurance (21-014296/AABS)

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