Registering Your Spousal Support Order
Who do you need to register your spousal support order with?
It is important to register it with the court, your employer and CRA.
Why is it important to register your spousal support with the Court?
It is important to register for your spousal support agreement with the Court as this helps ensure that your agreement made with your partner is legally recognized and enforceable. Registering with the court provides a formal record of support arrangement, which can help provide direction in the case of disputes or changes in the future. The court can also create mechanisms that aid in the enforcement of payments if spouses fail to meet their legal obligations. It can then be registered with FRO.
What is the name of the form you need to file to register your spousal support payments with CRA?
To register for spousal support payments with the CRA, you must file Form T1158 – “Registration of Family Support Payments”. If you are making the spousal support payments, you must input your yearly contribution on line 21999 of your annual tax return.
To be tax-deductible, how must spousal support payments be made?
Spousal support payments must be made in the form of a periodic (i.e. monthly) and not by a lump sum to be tax deductible unless the lump sum is to catch up on periodic payments which are in arrears.
Why is it important to register your order with your employer?
Since spousal support payments are tax deductible, you can have your employer reduce your deductions.
Which form do you need, as the payer, to have your employer reduce your deductions?
If you are a payer and you want your employer to reduce your deductions (as spousal support payments are deductible), you want to fill out form T1213 – “Request to Reduce Tax Deductions at Source” and submit the filled form to the CRA. Once the form is approved, you would then need to provide a copy of the form to your employer.
Which form do you need, as the recipient, to have your employer increase your deductions?
If you are the recipient of spousal support payments, you may need to adjust your TD1 tax form which determines the total amount of tax deducted from your pay. This can likely be requested from your employer’s HR department and you can indicate the changes in your circumstances (i.e. receiving spousal support). This will allow for deductions to be adjusted accordingly by your employer.
What happens if you make spousal support payments before a court order or separation agreement?
If this occurs, the spouse may refuse to acknowledge the support being received via an Interim Separation Agreement – depriving you of potentially significant tax deductions. This is because prior to a separation agreement being signed, any prior payments do not officially qualify as being tax deductible.
Which section of the Income Tax Act (ITA) provides a solution?
A potential solution to this problem is the ITA in which Section 56(1) of the ITA would allow you to deduct periodic spousal support that was paid prior to a court order coming into existence, but only if the order or agreement made afterwards specifically outlines that money has been paid/received. However, the ITA form can only help deduct previous payments made as far as a year back of the Court Order or Agreement being made. Any spousal support payments prior to that is not considered taxable income.
The ITA also typically only applies to periodic payments. Lump sum payments made prior to an agreement are more difficult to become deductible.
What are the three circumstances a lump sum is deductible?
The three circumstances in which a lump sum payment may be made deductible are if:
- It is paid according to an Order in conjunction to an existing obligation for periodic payments, where the payment made represents a larger sum of what may be paid out on a periodic basis so that funds for the recipient are secured early
- The lump sum payment is paid according to an Order that establishes an obligation to pay periodic support for a period prior to the date of the Order.
- The lump sum payment represents an amount that should have been paid earlier in a periodic fashion.
It is important to establish an interim separation agreement quickly to ensure that your ability to claim tax deductions on previously paid support is still valid given the ITA’s time limit.