Before talking about your marital status, a quick note about the June 15 deadline. If you need to make installment payments for 2017, June 15 is the next quarterly deadline. And if you are a snowbird and in the US on average 120 days or more per year, you may need to file a special tax notice for the IRS to let them know you have closer ties to Canada and won’t be filing a US tax return. And if you are self-employed (or spouse of), you need to file your taxes by June 15 to avoid tax filing penalties.
When it comes to Canada Revenue Agency, it’s very important to advise them when your marital status changes throughout your life. When you become common-law, married, add children (born or adopted), separate, or a spouse dies, your tax situation changes and you need to let CRA know about it.
Failure to report your status properly can lead to adjusted taxes (usually you have to pay some refunds back) or repayment of benefits including Canada Child Benefit, GST Credits, and Guaranteed Income Supplement.
Getting Married is pretty straight forward for Canada Revenue Agency: it’s clear when it happened. But do make sure CRA knows right away; they will recalculate the GST credit for both of you. It’s possible one or both of you qualified for GST credits when you were single, but now that you’re married, the credit is based on your combined income and is probably less (and only one of you will receive it) or it may be eliminated if your combined income is too high.
Common Law is not as clear: according to CRA you are common law after you have been living together for 12 months in a “married like relationship”. Be sure both of you contact CRA as soon as it has been 12 months of living together so your GST credit is recalculated at that point. If you don’t let them know at the 12 month mark, they will demand repayment of all the GST credits you received from that time until you advise them. And make sure you are clear with CRA when the 12 months after you moved together is (don’t give them the date you moved together; it’s the one year anniversary after that).
If one or both of you have children, then when you get married or move together, the Canada Child Benefit will be recalculated based on your combined income. Let CRA know right away, otherwise you may be repaying some or all of what you received incorrectly.
If both parents are the biological parents, Common Law is effective immediately. If only one parent is the biological parent, then CRA considers you Common Law immediately unless it can be proven that the non-biological parent is NOT financially responsible for the care and upbringing of the child(ren). This may be tough to do.
Don’t wait to do this next time you file your taxes, contact CRA immediately when you become Common-Law according to their definition. If you are not sure, contact me and I can walk you through it.
When a child is born, normally the paper work is completed at the hospital for Manitoba Vital Statistics and for the CRA Canada Child Benefit. But if you don’t start receiving the Canada Child Benefit for that child within a month or two, contact CRA to make sure they did receive the application. I have helped a few families in the area that had to re-apply for the CCB since CRA did not receive the application from the Vital Statistics or the hospital.
When you separate (whether you were Married or Common Law), let CRA know after 90 days. CRA’s definition is different than the legal term for separation. CRA considers you separated once you are no longer living under the same roof. And one or both of you may have to prove it. Although you can only notify CRA after 90 days, your Canada Child Benefit and GST credit will be recalculated back to the date of separation.
So once one partner leaves, it’s important the remaining partner return all physical mail “no longer at this address.”
I have spent lots of time with some separated single mom’s trying to prove their partner has left. The leaving partner doesn’t always change the address with CRA right away and if they move with parents or family or “couch surf” it’s hard to prove he/she has actually physically moved out. They may not be paying rent, and no utilities in their own name, and they may not change addresses with the bank, etc.
Learn from these mothers: if your partner no longer lives with you, don’t keep the mail for them. “Return to Sender”. It may seem harsh, but you need to let every organization know that they no longer live with you. Tell your doctor, your child’s doctor, your child’s day care or school. Tell as many “third party professionals” as possible, so they can vouch for you if you have to prove it to CRA.
The legal separation date can be quite different than the separation date that CRA will recognize. And the legal separation agreement often takes years to get in place.
Also once you have separated and you have children, advise CRA about the custody of your children. If the custody is “shared” (CRA definition is 50/50 or 60/40), then you need to advise CRA so the Canada Child Benefit is calculated properly. If you do not advise CRA of the custody arrangements and CRA determines later that you should have been only receiving 50% of the Canada Child Benefit, you will need to pay it back. It can be quite a hardship, so be upfront with CRA. Don’t just report separated on your tax return, call CRA directly to adjust your Canada Child Benefit.
When a spouse dies, CRA is normally notified fairly quickly. Most funerals assist with documents to apply for the CPP (Canada Pension Plan) Death Benefit and the CPP Survivor Benefit. Once Service Canada is aware of the death, they do share that info with CRA.
It’s still important to advise CRA in order for the GST credit to be recalculated and to be paid to the surviving spouse. Service Canada looks after CPP (Canada Pension Plan) and OAS (Old Age Security) and GIS (Guaranteed Income Supplement) and is a completely different department. They have their own application forms.
So whether you are getting married, have been living common law for 12 months, or immediately if you have children under 18, or if you separate or if your spouse dies, you need to let CRA know fairly quickly.
The sooner you do, the easier it is to deal with CRA and less likely some of your benefits will be “clawed back” if they were incorrectly paid to you.
A final reminder to get your 2016 taxes filed as soon as possible. If you (or your spouse) were self-employed in 2016, you have until June 15 2017 to file your taxes on time without penalty. If you are not self-employed, your deadline was April 30 and if you owe CRA, you now have penalties to pay (5% plus 1% for each month you are late). So get your taxes done now!
Anni Markmann is a Personal Income Tax Professional and Certified Financial Planner; living, working, and volunteering in our community. Contact her at 204.422.6631 or 36 Dawson Road in Ste Anne (near Co-op) or Info@SteAnneTaxService.ca