question for the accountants in the crowd

[return to the red]

So I will be doing my taxes in the next month and I have a question about filing as common-law or single. What is the main difference if you file living under common-law?

[Bobblehead]

If you have been living together 12 continuous months or more then you are common-law (and the only way it is not 'continuous' is if your spend 90 consecutive days living apart). There is no choice involved.

Common things that marriage affect can be seen here. (note: this doesn't mention GST Credit or the Child Tax Benefit which are also affected). Look for anything that depends upon Family Income, and that is what filing common-law will have an impact upon.

[Bobblehead]

Originally Posted by fotze

On another note, do having kids give a tax benefit?

They affect your Child Tax Benefit, and Ralph bucks, and I believe one of the CPC planks was to give more money to parents on a per child basis.

You do get to claim child care expenses (well, the LOWER income spouse does), but you wouldn't have those without the kid, so if you're having kids for tax benefits then financially your motives are suspect.

[cSpooge]

Originally Posted by fotze

I think it is a benefit if one of the two makes very little money, then you can use their basic alowance.

On another note, do having kids give a tax benefit?

you could get CCTB, and you an claim child care expenses, but as for the amount for eligible dependant you have to be single for some point of the year to be able claim any of it (its more for single parents).

[cSpooge]

http://www.cra-arc.gc.ca/E/pbg/tf/t778/README.html

theres a link to the form that you would need to fill out to claim them, it also comes with a list of what you can and can't claim

[Cube Inmate]

Originally Posted by Bobblehead

If you have been living together 12 continuous months or more then you are common-law (and the only way it is not 'continuous' is if your spend 90 consecutive days living apart). There is no choice involved.

Can you expand on this Bobb (or anyone, if you have time and expertise)? I have several questions....

First, the definition for being common law status requires a "conjugal relationship," but the definition used by the CRA is unclear, mainly because the word "conjugal" means something like "of or relating to marriage, or the relationship of spouses." My relationship has a lot of similarities to a conjugal relationship, but it is technically NOT one yet...it's missing the whole "marriage" aspect, as well as two spouses. Has this definition ever been questioned in the courts by either the CRA or an individual?

Second, claiming common law status allows certain benefits, but are there any drawbacks? I.e., you say that the status is "automatic," but has there ever been a case where people filed as singles and received a complaint from the CRA? I assume not, as long as they ended up paying more taxes.

Third, I have a question relating to the idea of "accidentally" becoming married by living together. In American states where common law marriage exists (not just common law status), a couple has to hold themselves out (claim) to be married, as well as the whole co-habitation requirement. Thus, it's impossible to accidentally become married just by living together, if that's not your intent. ... In Canada, are there any legal issues that might be encountered by a couple who never intended to be married, but filed their taxes as "common law status" because that's what the Gov told them to do?

To simplify: if we don't want to be married, but the Gov says we have to check the box labelled "living common law" because of an arbitrary 12-month rule, could that be used as later proof that we intended to be married in some legal proceedings? E.g., after a break-up, could an "ex" attempt to get some support out of me because of that status?

Complicated questions, but deserving of answer if anyone has the knowledge.

Edit:
I caught that mention of GST credit thing...that could have some effect if each person was below the threshold, but combined they were above...but no effect if neither one is eligible anyhow.

[Bobblehead]

First: Conjugal. Well, the real question is "are you having sex?", but people usually have an idea if they are common law. If you are living with your boyfriend/girlfriend then chances are you are on your way to being common-law.

Second: The GST Credit is the common drawback - one person has always gotten the GST credit and suddenly they are married and due to family income they no longer apply. Other things tend to be specific to individual returns. I can't come up with a big one right now, but I know I have amended a number of returns through the years because a change on one spouse altered another spouse indirectly (although this is often because of a husband/wife farm/business partneships).

Third: IANAL, but if you are required to file common-law, I would think you are considered common-law for all legal proceedings. Family law is black magic in my books.

[Ace]

I took some training from the CRA for doing volunteer tax work, one mainpoint they drove home was that you can only be "single" once. Once you file as common-law, in the future if you become "single" again you would have to file as "seperated". It's mostly just a terminology thing.

Also you would get a greater benefit if between you and your "common-law" partner donate more than a few hundred dollars to charity. The first few hundred dollars give you a lower tax deduction than everything over and above that, common law or married partners can combine all their donations to the higher income spouse. Thus you avoid having both partners lose some credit on the first few hundred dollars.

[Bobblehead]

Ace is right on the money. On the first $200 you get a 15% non-refundable tax credit. After that it is 29%.

So if a couple each claimed $200 they would each get $30 NRTC for a total of $60. However, if one person claimed the full $400, the total amount of the claim would be $88.

You are also allowed to carry forward charitable donations for 5 years, so if you can swing it it isn't a bad idea to only claim the receipts every few years.

[V]

Did the Harper bux pass legislation? Should I be expecting a cheque each month after this tax return?

I couldn't believe the disparity in what some people get for their Child Tax. We get a little less than 60 bucks for having one kid. I guess my wage has something to do with that as well. My sister-in-law (married) has 4 kids (3 under 5 years old) and lives in BC. She says that she gets 600 bucks!! I think I need more kids...

[Cube Inmate]

Thanks Bobb, Ace...it is black magic indeed. Or rather it's legal mumbo-jumbo that should be challenged.

Therefore, I will challenge the CRA to prove my "conjugal relationship" by continuing to file as "single" until I choose to get legally hitched...especially since neither of us is getting any benefits from filing that way.

I might be an idiot, but I'm a principled idiot.

[return to the red]

Thanks for the responses. We are gettin hitched in september so I guess I will be filing as common-law. Just another question though, isn't it 6 months of living with someone or did that recently change?

[ken0042]

Originally Posted by return to the red

Just another question though, isn't it 6 months of living with someone or did that recently change?

Depends on what branch of the gov't you are talking to. For Social Assistance it's 1 day. A buddy of mine found that out; he was on it for about a month after getting fired from a job, and he had to go and try and prove that he and his female room mate weren't sleeping together.

[Maritime Q-Scout]

ok... so my roommate and I have been living together since July '05 - so could we file as common law?

On that note, if he's native and we're common law, do I get all my taxes back?

I wouldn't actually as we're not lovers, just happen to live in the same apartment, but I'm curious if it's techincally possible.

[return to the red]

Ok, so next question...which number do you use as your MAXIMUM amount you can put into your RRSP on your statement, the 18% of your income or the RRSP deduction limit for 2005?

[Mccree]

Originally Posted by return to the red

Ok, so next question...which number do you use as your MAXIMUM amount you can put into your RRSP on your statement, the 18% of your income or the RRSP deduction limit for 2005?

The limit is based on your prior years income, so 18% of your 2005 earned income will effect you 2006 deduction limit.

[Bobblehead]

Originally Posted by return to the red

Ok, so next question...which number do you use as your MAXIMUM amount you can put into your RRSP on your statement, the 18% of your income or the RRSP deduction limit for 2005?

Have you been maxing your contributions every year?

I'd say use what is on your last year's notice of assessment or call CRA. If you've got a lot of coin and want to put even more in your RRSP, you can consider what your additional limit will be for 2005 income and put that in as well. As long as you don't exceed your max limit by $2K you are safe (above that the penalties can pile up).

[Ironhorse]

OK, maybe someone can answer this one for me.

Where do I claim my kid's pre-school fees from last year? I've paid over $1,300, I gotta be able to claim that somewhere.

Any accounting types here that can give a quick insight?

Gracias

[cSpooge]

check the T778 form that lists what is acceptable for child care expenses.