When to declare common law?

[Robotic]

Just curious on when someone should start declaring common law on taxes, government forms, etc. What are the benefits/disadvantages on this? Would we be taxed as a couple, or individually as if we weren't a couple?

Thanks

[Parallex]

Don't know... me and Mrs. Parallex always prepare two tax forms one where we file jointly and another where we file seperately and thus far it's always made more sense for us to file seperately (although we're essenually single income now that Baby #1 is here so I suspect that next year might be different).

I presume that once we start getting more back by joint filing that's when we'll start doing it.

[Traditional_Ale]

Originally Posted by Robotic

Just curious on when someone should start declaring common law on taxes, government forms, etc.

Never.

[AR_Six]

Your status as common law for tax purposes does not require a declaration. If you've cohabited in a conjugal relationship for at least one year, tag, you're it.

[Locke]

When you've been living together for at least a year, or instantly upon having a child together.

Originally Posted by Parallex

Don't know... me and Mrs. Parallex always prepare two tax forms one where we file jointly and another where we file seperately and thus far it's always made more sense for us to file seperately (although we're essenually single income now that Baby #1 is here so I suspect that next year might be different).

I presume that once we start getting more back by joint filing that's when we'll start doing it.

I dont want to rag on you, but in my line of work I see this all the time and it should go in the WGMG thread, but there it is.

People pick and choose how and when to file like this, and in Britain these people are referred to as 'Benefits Cheats.' Collecting benefits and credits to which they are not entitled.

[Robotic]

Since my girl makes less than I do, is there any benefit for either of us to start declaring common law? Could I potentially be taxed at a lower bracket since I would be supporting her?

[opendoor]

Generally if you've been living together for 3 years, you're already common law spouses (or in an Adult Interdependent Relationship as it's referred to in Alberta) and legally you're supposed to file as such.

As for taxes, there isn't a huge difference whether you're married or not. You might lose some credits (GST, etc.) as some of them are calculated using household income, but for the most part there isn't a huge difference. You can also transfer some credits like tuition between common law spouses where you can't between individuals, so there are some advantages as well.

But really, it's not a matter of choice. If you are living in a common law relationship and continue to declare yourself as being single on your tax returns you're submitting false information.

[opendoor]

Originally Posted by Robotic

Since my girl makes less than I do, is there any benefit for either of us to start declaring common law? Could I potentially be taxed at a lower bracket since I would be supporting her?

You can't split income, but if she's making less than the basic personal exemption of $10,527 you can get a spousal tax credit for some or all of her exemption.

[Locke]

Theres lots of differences, generally speaking two individuals of similar incomes would see little to no difference between filing single versus filing as common-law.

Once there are kids or low income partners or partners who are students, then that changes things.

[Bill Bumface]

Since Locke is doling out help for free, I've got a massive T5 coming from closing down my old corporation. I'm also filing common law for the first time. Can this be used to help me at all, or am I still boned?

[Locke]

Originally Posted by hulkrogan

Since Locke is doling out help for free, I've got a massive T5 coming from closing down my old corporation. I'm also filing common law for the first time. Can this be used to help me at all, or am I still boned?

Thoroughly boned.

[GGG]

The big benefit of not being joint when you have kids is if one of you is below the low income cutoff for the thousands of dollars in programs each year that are available. From GST checks, to extra RESP matching, bus passes, etc etc. I took a look at it once and pretending to get divorced would get an extra 10-20k a year out of the government. I am not that dishonest but I know people who do it.

But you are a tax cheat if you do it, and would be subject to significant penalties if you ever got caught.

[DownhillGoat]

Originally Posted by opendoor

As for taxes, there isn't a huge difference whether you're married or not.

In what country?

[opendoor]

Originally Posted by kunkstyle

In what country?

Canada. It's not like the USA where you can file jointly and effectively split your income. Every Canadian has to file their own return and their spouse's income is generally only used to determine eligibility and benefit levels for some programs

As Locke said above, if you have a single income household or one person is a student, then it can make a difference because you can transfer tax credits. But for the average 2 income household the tax burden is very similar whether you're a married couple or two individuals. Obviously if you out and out lie (such as claiming you're a single parent when you're not) you get some savings, but that's straight up tax fraud and not really relevant.

[Rerun]

Originally Posted by Robotic

Since my girl makes less than I do, is there any benefit for either of us to start declaring common law? Could I potentially be taxed at a lower bracket since I would be supporting her?

The benefit of not declaring it, dependent upon her yearly income, is that she would retain her GST rebates... assuming she makes under the cut-off income.

[DownhillGoat]

Originally Posted by opendoor

But for the average 2 income household the tax burden is very similar whether you're a married couple or two individuals.

Not sure what I was doing wrong but when I was married and entered my spouse's income in quick tax I got railed hard.

[opendoor]

Originally Posted by kunkstyle

Not sure what I was doing wrong but when I was married and entered my spouse's income in quick tax I got railed hard.

Was that compared to previous tax years or compared to with and without your spouse's income included on that particular return? Because if you filled out your form saying you were married but didn't put your spouse's income in right away then Quicktax would calculate assuming your spouse made $0 which would give you an extra $10,527 in exemptions. Once you input the income though, the program recalculates and your tax bill goes up by several thousand because your spouse's exemption is no longer transferred to you. But that discrepancy isn't a comparison between being married and being single, it's a comparison between having a spouse with zero income and having one with a full time job.

Now, if you're comparing to previous years, then I'm not sure what the issue is. Maybe some income sensitive tax rebates that you no longer qualified for, but those don't usually amount to a whole lot.

[Traditional_Ale]

Originally Posted by opendoor

But really, it's not a matter of choice. If you are living in a common law relationship and continue to declare yourself as being single on your tax returns you're submitting false information.

This really GMG. Why the hell does the government think they're entitled to know if I am in a long term relationship or not!?

[DownhillGoat]

Originally Posted by opendoor

Was that compared to previous tax years or compared to with and without your spouse's income included on that particular return?

Both, actually.

[ken0042]

Originally Posted by Traditional_Ale

This really GMG. Why the hell does the government think they're entitled to know if I am in a long term relationship or not!?

Because taxes are based on household income. Fewer people in the household means a greater percentage of the household income goes to paying the bills.