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Divorce & Family Law This forum is for discussing any of the legal issues involved in your divorce.

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  #1 (permalink)  
Old 04-01-2012, 08:53 PM
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Default Eligible dependent tax and my child support situation

Hi All,

I know that the complexities of the eligible dependent tax credit have been debated here a few times, but I am still confused about my situation. Any advice would be sincerely appreciated.

Here is my situation:
  • Ex has no income (except UCCB).
  • I have an income and I pay both spousal and child support.
  • Child support is agreed to be table amounts using the offset calculation (which results in me paying full table support and her paying nothing due to her lack of income).
  • We have two children (aged 4 and 6).
  • We have a "shared custody" agreement (i.e. I have the kids 40% of the time, she has them 60%, and we have joint custody).

Ideally, we'd like to split (mostly for me) the eligible dependent claim such that we each claim one of the children. However, reading the CRA web site, it seems like this is not possible because I'm the one stuck paying the child support.

Here are quotes from the 2011 CRA web site:

#1: You can claim the credit if ...
[link to CRA]
"you did not have a spouse or common-law partner or, if you did, you were not living with, supporting, or being supported by that person;"
  • This confuses me so I'm thinking I don't understand what this means.
  • If you are supporting your ex (via spousal support payments), you can never claim an eligible dependent? Huh?
  • Or is it just saying you cannot claim your "spouse" as an eligible dependent if you are supporting him?

#2: You cannot claim the credit if ...
[link to CRA]
"The claim is for a child for whom you were required to make support payments for 2011."
  • As I mentioned, I am required to make child support payments and my wife's child support contribution is 0 due to income.
  • Does this mean, despite our shared custody arrangement, I cannot claim a child as an eligible dependent?
  • Is it possible for me to claim the credit if we state that we have agreed on how to split the eligible dependents between us, we have shared access/custody, and we have a separation agreement outlining we will pay child support using table values plus offset calculation (despite the fact that, today, she is not paying child support yet).
  • Or am I basically hosed on this?

Any help/advice/condolences would be appreciated.

Concerned Dad
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Old 04-01-2012, 10:05 PM
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You can't claim eligible dependant, and it is a very stupid tax rule. I'm in a very similar instance, and this is the only year I can claim eligible dependant (unless I get in a situation where I don't pay child support). The only reason I can claim it this year is because:

1) I was only separated part of the year.

2) I was supporting my children in a home that I maintained and they lived with me (had 50/50 for basically 2 months before things got bad).

3) I'm not claiming any spousal support payments.

Even if you had the kids with you 60% of the time you would not be able to claim it.

It sucks but the guidelines are clear.

You are able to collect CCTB if your income is low enough, and UCCB for yourself with a near equal parenting arrangement.
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Old 04-01-2012, 10:08 PM
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I missed the first part of your question.

Youse ex is NOT your spouse or common-law partner. Some partners are forced to keep separate residences (see involuntary separation) throughout the year and as long as they are each supporting themselves the one who has the kids can claim them as a dependant (similar to a single parent situation). It has nothing to do with spousal support.
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Old 04-01-2012, 10:44 PM
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I am in the same situation as you and you CAN absolutely claim the Eligible Dependent credit in the year of your seperation. As well, if you have shared custody (50/50 or 60/40) and using the offset amount for child support, you may each claim a child as an Eligible Dependent - it only has to be a different child (thus if you have 2 or more kids - you are ok). With only 1 child - only 1 parent can claim (but that claiming parent if they had any scrupples at all would give the other part of their refund).

See the following on the CRA website:

Can you claim the amount for an eligible dependant?

"
Can you claim the amount for an eligible dependant?

Answer the following questions to find out if you can claim an amount for an eligible dependant.
You may be able to claim this amount if, at any time in the year, you met all of the following conditions at once:
  • you did not have a spouse or common-law partner or, if you did, you were not living with, supporting, or being supported by that person;
  • you supported a dependant in 2011; and
  • you lived with the dependant (in most cases in Canada) in a home that you maintained. You cannot claim this amount for a person who was only visiting you.
In addition, at the time you met the above conditions, the dependant must also have been either:
  • your parent or grandparent by blood, marriage, common-law partnership, or adoption; or
  • your child, grandchild, brother, or sister, by blood, marriage, common-law partnership, or adoption and either under 18 years of age or physically or mentally impaired.
Notes
Your dependant may live away from home while attending school. If the dependant ordinarily lived with you when not in school, we consider that dependant to live with you for the purposes of this amount.

For the purposes of this claim, your child is not required to have lived in Canada but still must have lived with you. This would be possible, for example, if you were a deemed resident living in another country with your child.
Even if all the preceding conditions have been met, you cannot claim this amount if any of the conditions listed in the section called What are the situations in which you cannot claim the amount for an eligible dependant? applies."

Clicking on the last link for what are the situations you cannot claim...

"Even if all of the conditions have been met to claim the amount for an eligible dependant (read "Can you claim the amount for an eligible dependant?"), you cannot claim this amount if any of the following applies:
  • You are claiming a spouse or common-law partner amount (line 303).
  • The person for whom you want to claim this amount is your common-law partner. However, you may be able to claim the amount on line 303.
  • Someone else in your household is making this claim. Each household is allowed only one claim for this amount, even if there is more than one dependant in the household.
  • The claim is for a child for whom you were required to make support payments for 2011. However, if you were separated from your spouse or common-law partner for only part of 2011 due to a breakdown in your relationship, you can still claim an amount for that child on line 305 (plus any allowable amounts on lines 306, 315, and 318) as long as you do not claim any support amounts paid to your spouse or common-law partner on line 220. You may claim whichever is better for you.
Note
If you and another person were required to make support payments for the child for 2011 and, as a result, no one would be entitled to claim the amount for an eligible dependant for the child, you can still claim this amount provided you and the other person(s) paying support agree that you will be the one making the claim. If you cannot agree on who will claim this amount for the child, neither of you can make the claim."

What is important is the last paragraph - about you both being required to pay support payments thus no one would be eligible.

And here is the link from CRA explaining how to apply the legislation:
Shared custody and the amount for an eligible dependant

"
Shared custody and the amount for an eligible dependant

If you and another person were required to make support payments for a child and, as a result, no one would be entitled to claim the amount for an eligible dependant for the child, you can still claim this amount provided you and the other person(s) paying support agree you will be the one making the claim. If you cannot agree who will claim this amount for the child, neither of you can make the claim.
For more information about your eligibility to claim the amount for an eligible dependant, see line 305.
Example 1
Ryan and Chloe share the custody of their child Faith. Faith spends 50% of her time with Ryan and 50% of her time with Chloe. The court order states that Ryan has to pay Chloe $200 a month and that Chloe has to pay Ryan $100 a month. For convenience, Ryan agrees that Chloe does not have to write him a monthly cheque and that he will simply pay her $100 a month, which will fulfill both their support obligations.

Ryan and Chloe agree that Ryan will claim the amount for an eligible dependant on line 305 of his income tax and benefit return. If they did not agree, neither of them could claim the amount on line 305 for Faith.

Example 2
Nicholas and Christine share the custody of their children Sam and Amy. Sam and Amy spend 50% of their time with Nicholas and 50% of their time with Christine. The written agreement states that Nicholas has to pay Christine $300 a month and that Christine has to pay Nicholas $400 a month. For convenience, Christine agrees that Nicholas does not have to write her a monthly cheque and that she will simply pay him $100 a month, which will fulfill both their support obligations.

Nicholas will claim the amount for an eligible dependant on line 305 of his income tax and benefit return for Sam. Christine will claim the amount for an eligible dependant on line 305 of her income tax and benefit return for Amy.
A payment based on a court order or written agreement that calculates child support obligations with reference to a statutory scheme (such as The Federal Child Support Guidelines) but does not obligate both parents to pay child support, is not considered a support amount for the recipient, since there is no legal obligation for the recipient to pay an amount. However, the payer may be considered to have made support payments.
Example
William and Julie share custody of their children, Emily and Eric. Emily and Eric spend 50% of their time with William and 50% of their time with Julie. Based on William's and Julie's incomes, the court order states that William has to pay Julie $250 a month according to The Federal Child Support Guidelines. The amount William pays is considered a support payment. Therefore, William is not entitled to a claim on line 305 for either Emily or Eric. However, Julie can claim an amount for an eligible dependant on line 305 of her income tax and benefit return for Emily or Eric. "

Example #2 would apply in the situation - an offset amount.
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Old 04-01-2012, 10:50 PM
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Sorry for the long post - but it is tax law.....I was on the phone about this with CRA for an hour yesterday.
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Old 04-02-2012, 12:23 AM
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inseparationhell has it right EXCEPT that ConcernedDad is not paying the setoff amount despite shared custody because the ex is claim $0 income.

This is an unfortunate loophole. The CS amounts are calculated based on income MINUS spousal support payments (among other deductions.)

Technically ConcernedDad should not make the claim. If his CS amounts were even a dollar below table he could get away with it.

IF ConcernedDad is receiving his share of Child Tax Credit and this has been processed and approved (CRA may ask for a copy of the custody order for example) then he is in the system as having shared custody. In this case, he could claim the credit and not get challenged but if he got challenged later, they might disallow it. The intent of the rule is to allow shared custody parents to make the claim, but the awkward wording would make it a concern in this case.
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Old 04-02-2012, 12:25 AM
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Thanks for the response inseperationhell.

Isn't the example you are giving specifically about when both parents owe child support? E.g. "Nicholas has to pay Christine $300 a month and that Christine has to pay Nicholas $400 a month"

In my case, because my ex has no income, she doesn't technically owe me anything for child support. Our agreement is written such that we use the table calculations and offset method, but until she gets an income this means that I am paying full support to her.

Any thoughts on this? Do your examples still apply in my case?

Thanks

ConcernedDad
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Old 04-02-2012, 07:22 AM
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Are you currently getting CCTB/UCCB as a shared custody arrangement? If not you should.

Technically it's a gray area and it all depends on how you argue it.

Because your ex is not working, she's paying 0 support. DOES YOUR AGREEMENT INDICATE SET OFF CS?

If your court order indicates set off, then you MIGHT be able to claim "A" child as the eligible dependent, because technically you are paying offset CS.

It's an easier sell if you are already on file as being in a shared custody arrangement. (by having the CCTB/UCCB split).

I think you should get your ex imputed an income equal to full times hours at min. wage....her income CANNOT be ZERO. Makes no sense.
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Old 04-02-2012, 10:23 AM
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I'm working on the CCTB/UCCB split right now.

Our separation agreement is not signed yet. We are likely to sign later this month. It does state that it is offset amount for CS.

Ex claims she needs to retrain. She is taking a few years to do this and then plans to work full time. In the meantime, the mediator convinced us to consider her as having no meaningful income (imputed or otherwise). Now, we have a big entwined agreement around custody, access, extraordinary expenses, etc ... it would be difficult for me to come back and insist she has get imputed income without incurring her wraith/retribution in other areas of the agreement.

Another question: What if we agreed to put in a minimum support payment clause in the separation agreement? For example: "Each party shall be obligated to pay a minimum of $25 child support, modified via offset calculation, regardless of income level". I might be able to get her to agree to that.

Would that be enough for me to claim that we are both paying support and thus I can claim the eligible dependent credit?

I know ... I'm grasping here ...
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Old 04-02-2012, 10:34 AM
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Not grasping. Explain the tax implications to her. The deductions is meaningless to her. If she pays, on paper, $25 per month it is more than made up by the tax refund.

Keep in mind, you CANNOT do this unless you are collecting the CCTB, which means she will lose half. She won't like this, but this is required by CRA according to your shared custody, it is required in order to claim the deductions. You need to (reasonably and politely) stress that it has to be done no matter what.

If it were me, I would offer to split half of the tax refund from the dependant claim with her. There is also nothing wrong with claim both children (you will want to change this when she is working full time.) You won't get double the effect, but she is getting nothing back anyway by claiming one. Doing this and splitting the return may get her onside. If she turns you down, explain that you MUST according to CRA rules, split the CCTB no matter what, so by agreeing to the $25 per month set-off and splitting the tax refund for the dependant deduction, this is the only way she can break even.
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