What is the duty to inform CRA of your change in marital status?

The Canada Revenue Agency (CRA) requires individuals to inform them of a change in marital status. This is important because your marital status can affect your eligibility for certain benefits and credits, such as the Canada Child Benefit (CCB), the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit, and others.

You are required to inform the CRA about your change in marital status by the end of the month following the month your status changed. For example, if you get married, enter into a common-law partnership, divorce, or your spouse or common-law partner passes away, you must inform the CRA by the end of the next month after the change occurs.

You can report a change in marital status to the CRA through various methods:

• Online: By using the “Change my marital status” service in My Account on the CRA website.
• By phone: By calling the general enquiries line.
• By mail: By sending a completed Form RC65, Marital Status Change, to the CRA.

It is important to report changes in your marital status to ensure you are receiving the correct amount of benefits and credits you are entitled to and to avoid potential overpayments, which you would need to repay.

How long do you have to be separated to report to CRA?

To report a separation to the Canada Revenue Agency (CRA), you and your spouse or common-law partner must have been separated for a period of at least 90 days due to a breakdown in the relationship. Once this 90-day period has passed, you are required to inform the CRA about the change in your marital status.

For example, if you separated on June 1 and remained separated for at least 90 days, you should inform the CRA by the end of October.

What requirements do you need to meet to have CRA consider you to be in a common-law relationship?

The Canada Revenue Agency (CRA) has specific criteria to define a common-law partnership for tax and benefit purposes. According to the CRA, you are in a common-law relationship if you meet the following conditions:

• Cohabitation: You live in a conjugal relationship with a person who is not your spouse.
• Duration: You have been living with your partner in a conjugal relationship for at least 12 continuous months. This includes any period you were separated for less than 90 days because of a breakdown in the relationship.

Additionally, the CRA also considers you to be in a common-law relationship under the following circumstances, regardless of the time you have lived together:

• If you and your partner have a child together by birth or adoption.
• If you have custody and control of your partner’s child (or they have custody and control of your child) and the child is wholly dependent on that person for support.

If you separate and live in the same house, are you separated according to the CRA?

Yes, the Canada Revenue Agency (CRA) can consider you to be separated even if you and your spouse or common-law partner continue to live in the same house, provided certain conditions are met.

Living separate and apart while under the same roof means that you and your partner have stopped living as a couple. This can be demonstrated through various changes in how you and your partner interact and manage your lives, including but not limited to:

• Sleeping in separate rooms.
• Eating meals separately.
• Performing household chores, banking, and other domestic activities independently.
• A clear division of financial responsibilities.
• Minimal or no communication or social interaction between you as a couple.

The key aspect the CRA looks for is the breakdown in the conjugal relationship, not necessarily the physical separation. It’s essential to document the changes in your living arrangement and relationship status, as the CRA may require proof of your claim that you are living separate and apart while remaining in the same house.

What are the exceptions to CRA not considering you separated?

However, there are situations where you may live separate and apart but the CRA does not consider you separated for tax and benefit purposes. Here are some of those exceptions:

• Short-Term Separation: If you and your spouse or common-law partner are separated temporarily with the intention to reconcile, and the separation lasts less than 90 days, the CRA does not consider you to be separated. This can include separations due to work obligations, travel, medical reasons, or other temporary circumstances where the intent is to resume the relationship.
• Voluntary Separation for Reasons Other Than a Relationship Breakdown: If you and your partner choose to live apart for reasons other than a breakdown in your conjugal relationship (for example, for work or education purposes), the CRA may not consider this a separation for the purposes of assessing your tax and benefit entitlements.
• Lack of Changes in Domestic Arrangements: If you claim to be separated but continue to maintain a conjugal relationship or present yourselves in public as a couple, sharing financial responsibilities, and living as if you were not separated, the CRA may not recognize the separation. The agency looks for evidence of a significant change in the relationship, not just physical separation.

Why is it important to keep the CRA aware of your marital status?

Keeping the Canada Revenue Agency (CRA) informed about your marital status is crucial for several reasons, as it directly impacts the calculation of your taxes and eligibility for various benefits and credits. Here’s why it’s important:

Accurate Benefit Payments: Your marital status affects your eligibility for government benefits and credits, such as the Canada Child Benefit (CCB), the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit, and provincial or territorial benefits. Reporting your correct marital status ensures you receive the right amount of benefits for which you and your family are eligible.

Correct Tax Calculations: Certain tax credits and deductions depend on your marital status, such as the spousal amount, the eligible dependent credit, and the splitting of certain pension incomes. Accurately reporting your marital status helps ensure that you’re taking advantage of all the tax savings available to you and avoiding any potential issues with the CRA.

Avoidance of Overpayments and Penalties: If you receive benefits based on incorrect marital status, you might have to repay any overpayments. The CRA periodically checks and if they find discrepancies, you might also face penalties or interest on amounts owed. Keeping the CRA updated helps prevent these situations.

Compliance with Tax Laws: Reporting your marital status accurately is a legal requirement under Canadian tax law. Failing to inform the CRA about a change in marital status could be considered non-compliance, which could lead to audits or reassessments.

Efficient Processing of Returns and Adjustments: When the CRA has your current marital status, it can more efficiently process your tax returns and any necessary adjustments. This can lead to quicker refunds or the proper application of benefits.

Optimized Benefit and Credit Allocation: For couples, accurately reporting whether you are married or in a common-law partnership can optimize the allocation of credits and benefits between partners, potentially resulting in greater overall financial benefits for the household.

What is CCB?  

The Canada Child Benefit (CCB) is a tax-free monthly payment made to eligible families to help them with the cost of raising children under the age of 18 years. Administered by the Canada Revenue Agency (CRA), the CCB aims to assist families with the financial burden of raising children, whether for paying for necessities such as food, clothing, and activities for their children.

The amount of the CCB a family receives is based on several factors, including:

• The number of children in the family.
• The ages of the children
• The family’s net income.
• The marital status of the parent or guardian applying for the benefit.

Each year, the CCB amounts are adjusted to account for inflation. The benefit year for the CCB runs from July of one year to June of the next. Families must file their income tax and benefit returns every year, even if they did not earn income in the year, to continue receiving the CCB without interruptions.

In addition to the base CCB, families may also be eligible for provincial or territorial child benefits and the child disability benefit (CDB), which is a supplementary benefit for families who care for a child under the age of 18 with a severe and prolonged impairment in physical or mental functions.

The CCB is designed to decrease as the family’s net income increases, ensuring that the support is directed primarily towards lower to middle-income families.

Who normally receives the benefit?

The Canada Child Benefit (CCB) is normally paid to the parent who primarily takes care of the child or children under the age of 18. This parent is responsible for the day-to-day activities and needs of the child, including health, education, and overall well-being. Typically, this is the parent with whom the child lives most of the time.

In situations where the child spends equal time with both parents, such as in a joint custody arrangement, both parents might be eligible to receive half of the CCB payment they would have received if the child lived with them full-time. In these cases, each parent must apply for the CCB separately.

To receive the CCB, the parent or guardian must meet the following criteria:

• tax purposes.
• Be the primary caregiver of a child under 18.
• Be a Canadian citizen, a permanent resident, a protected person, or a temporary resident who has lived in Canada for the previous 18 months, and who has a valid immigration status.

If a child is under the care of a department, agency, or institution that receives a children’s special allowance (CSA), the CCB cannot be issued since the CSA takes its place. 

The CCB is a crucial benefit designed to help families with the cost of raising children, aiming to provide financial support to those who need it most.

After separation, how is CCB paid if parenting time is equal?

When parents separate and share equal parenting time, the Canada Child Benefit (CCB) are affected in specific ways.

Canada Child Benefit (CCB)

In situations where separated parents share equal parenting time, the Canada Revenue Agency (CRA) can split the payment of the CCB between the parents. This means each parent would receive 50% of the CCB amount they would have been eligible for if the child lived with them full-time. It’s important for both parents to apply for the CCB and to inform the CRA of their shared custody arrangement to ensure the benefit is distributed correctly.

What is an eligible dependent tax credit?

The Eligible Dependent Tax Credit, often referred to as the Equivalent-to-Spouse Credit, is a non-refundable tax credit available in Canada. It is designed for taxpayers who support a dependent, such as a child, parent, or another relative, under certain conditions. This credit can significantly reduce the amount of tax an individual owes to the federal government, and similar credits may also be available at the provincial or territorial level.

To qualify for the Eligible Dependent Tax Credit, the taxpayer must meet the following criteria:

• They were not married or in a common-law relationship, or if they were, they were not living with, supporting, or being supported by their spouse or common-law partner.
• They supported a dependent living in their home. The dependent is related by blood, marriage, common-law partnership, or adoption. Eligible dependents typically include children under 18, or children of any age if they are dependent on the taxpayer due to an impairment in physical or mental functions. The dependent’s net income is below a certain threshold, which may affect the amount of the credit. The credit amount is based on a fixed amount minus the dependent’s net income, making it potentially lower for dependents with higher incomes. 

It’s essentially designed to offer tax relief to single parents or those supporting eligible relatives, providing financial assistance through the tax system.

However, in shared custody arrangements, the credit cannot be split and is only available to one parent in a given tax year. Parents may decide to alternate who claims the credit from year to year.

The Eligible Dependent Tax Credit can provide substantial financial relief, so it’s important for eligible taxpayers to understand the criteria and claim the credit if they qualify. Given the complexities of tax laws, consulting with a tax professional for personal advice is often beneficial.

Can you claim the child dependent credit if you pay child support and the other parent does not?

You cannot claim child dependent credit if you are making the payments for child support. The other parent that does not pay is eligible to claim the dependent credit in their tax return on line 30400.

If you both pay child support, under what conditions can the eligible dependent tax credit be claimed? 

For the Eligible Dependent Tax Credit (also known as the Equivalent-to-Spouse Credit) in Canada, both parents cannot claim this credit for the same dependent in the same tax year. This credit is designed to provide tax relief to individuals who are single and supporting a dependent, which includes children under 18, or a dependent of any age if they are dependent due to an impairment in physical or mental functions.

In cases of shared custody, the tax laws stipulate that only one parent can claim the credit for a particular child in a tax year. However, parents can agree to alternate who claims the credit from year to year, provided they each meet the eligibility criteria in the year they make the claim. This arrangement allows parents to share the tax benefit over time, although it requires coordination and agreement between them.

Why is it important for a separation agreement or court order to specify how the dependent credit is to be claimed? Explain how the court order must state that both parents pay CS rather than pay the offset amount.

The Court Order’s objective is to decide who is eligible for dependent credits and make sure that both parents are meeting the tax obligations. Both parents must pay full child support, with no reductions from a set-off amount. Under the Income Tax Act, if one parent pays child support, they are unable to claim for EDA on their tax return. If both parents pay child support separately, they would both have the option to claim the EDA for their tax return. Whereas if there’s a court order of agreement on a set-off payment, the parents will be restricted because only one parent will be able to make the claim for the EDA. 

Incorporating specifics about how the Eligible Dependent Tax Credit (also known as the Equivalent-to-Spouse Credit) is to be claimed in a separation agreement or court order is crucial for several reasons. These directives serve to prevent confusion, ensure fairness, and comply with tax laws, particularly in situations involving shared custody or financial responsibilities for dependents. Here’s why it’s important:

• Clarity and Certainty: Specifying how the tax credit is to be claimed removes ambiguity and provides clear guidance on the rights and responsibilities of each parent. This clarity is essential for avoiding disputes and misunderstandings between the parents regarding tax claims.
• Fairness: A separation agreement or court order that outlines who can claim the credit and when (such as alternating years) ensures that the financial benefits of supporting a dependent are distributed fairly between the parents. This is especially important in shared custody arrangements where both parents contribute to the care and support of the child.
• Compliance with Tax Laws: The Canada Revenue Agency (CRA) requires that claims for tax credits and deductions comply with the law. A separation agreement or court order that specifies the arrangement for claiming the Eligible Dependent Tax Credit helps ensure that both parents’ tax filings are in accordance with CRA guidelines, which can prevent issues such as audits or reassessments.
• Facilitates Tax Planning: Knowing in advance who is eligible to claim the tax credit allows each parent to plan their finances and tax strategies more effectively. This can lead to better financial management and potentially maximize the overall benefits received by the family unit.
• Resolution of Conflicts: A clearly defined agreement can serve as a legal reference point if disputes arise between the parents regarding the tax credit. This can help resolve conflicts more efficiently and may reduce the need for further legal intervention.
• Ensuring Benefit Eligibility: The Eligible Dependent Tax Credit can significantly impact a parent’s tax situation. Ensuring that the agreement is clear on who claims the credit helps protect the financial interests of all parties involved and ensures that the child or dependent needs are met.

For these reasons, it’s beneficial for separation agreements or court orders to explicitly address the issue of tax credits and deductions. Given the complexity of tax laws and the potential for financial impact, consulting with legal and tax professionals during the drafting of such agreements is highly advisable.