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Spousal Equivalent for CRA

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  • Foredeck
    replied
    That ruling is from 2001, and I've read on the CRA website from early 2009 that they have changed the rules.

    In that ruling, it states that if you have shared custody, and the dad is paying the net amount, he is not entitled to the equivalent to the spouse. However, as of 2009, with shared custody, either parent can claim CCTB/equivalent to a spouse. The CRA presumes that each parent pays their gross amount of child support, when in reality the highest earning pays the net amount.

    Leave a comment:


  • billiechic
    replied
    well that made it PERFECTLY clear

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  • LivedThroughIt
    replied
    I asked my accountant to look into this and he secured an opinion from CRA on how this works.

    Essentially if you file your tax return with anything listed under Child Support Payments you will be sent a letter asking for a copy of your separation agreement. Payors cannot claim for the child they are paying for.

    If you want to do it, and you have multiple children, you can arrange your separation agreement in such a way that you are paying your spouse support for some of the children, and she is paying you for some of the children, and then you can both claim one of the children you are not paying for.

    Frankly I think the whole thing is a fantastic bloody mess and I don't know what the heck CRA is thinking in this. It seems to me they took the easy way out by barring payors from claiming the credit and it's just another way to weight the child support tables in favour of Mom's with sole custody. Life these days is far more complicated than this.

    Here is the body of the letter my accountant received from CRA you are interested in scenario #3:

    (I had to trim this post substantially because there's a size limit on posts)

    Source:
    CCH Tax/Federal Income Tax/Tax Window Files/Tax Window Files/2000s/2001/July/
    Child Support
    July 06, 2001
    Window On Canadian Tax Commentary
    Income Tax Act: 56(1)(b), 60(b), 56.1
    Interpretation Bulletins: IT-99R5, Legal and Accounting Fees (Consolidated); IT-530, Support Payments
    Information Circulars: IC 70-6R4, Advance Income Tax Rulings
    Please note that the following document, although believed to be correct at
    the time of issue, may not represent the current position of the Department.


    In respect of scenario 1A, which involves sole custody of both children by
    Mom and an agreement or order that requires Dad to pay child support for both
    children, in our view, Mom is entitled to the equivalent-to-spouse amount and
    Dad is not.
    In scenario 1B, which involves sole custody of both children by Mom, the
    agreement or order requires Dad to pay child support only for Dave and does
    not provide for child support for Jane. As it is unclear how in the
    circumstances only one child would be entitled to support and whether the
    "wholly dependent" requirement in paragraph 118(1)(b) of the Act is met, we
    are unable to comment.
    In scenario 2, which involves sole custody of Dave by Mom and sole custody of
    Jane by Dad (split custody), the agreement or order requires Dad to pay child
    support to Mom for Dave and requires Mom to pay support to Dad for Jane, with
    the support payments being offset and the difference being paid by the parent
    with the liability for the higher support amount to the other parent. In our
    view, both Mom and Dad may be entitled to claim the equivalent-to-spouse
    amount, Mom for Dave and Dad for Jane.

    In scenario 3A, which involves each of Mom and Dad having each child for more
    than 40% but less than 60% of the time (shared custody), the agreement or
    order requires Mom to pay a specified amount of child support for both
    children and Dad to pay a higher specified amount of child support again for
    both children. The payment of these two support amounts is effected by Dad,
    whose liability for support is higher, having to pay Mom the difference (i.e.,
    net amount) between the two support amounts. In our view, assuming that the
    order or agreement imposes a liability on Mom and Dad for their respective
    specified child support amount (as opposed to one liability being imposed on
    Dad for the net amount), neither Mom nor Dad would be entitled to claim the
    equivalent-to-spouse amount.
    In scenario 3B, which involves the same custody arrangement as in scenario
    3A, the agreement or order simply requires Dad to pay a specified child
    support amount (which is equal to the net amount paid by Dad in scenario 3A)
    for both children and does not require Mom to pay any child support. In our
    view, Mom may be entitled to claim the equivalent-to-spouse amount for either
    Dave or Jane while Dad cannot claim it for either child.
    In scenario 3C, in which, as you stated, the "custody arrangements are
    identical to scenario 3A above, except that the agreement or order provides
    that, although custody is shared, Dad shall have primary custody of Jane and
    Mom shall have primary custody of Dave," the order or agreement provides for
    payment arrangements as in scenario 3A, except that the specified amount of
    child support to be paid by Dad is specifically for Dave and that to be paid
    by Mom is specifically for Jane. We presume that your reference to "primary
    custody" is to the amount of time spent by the child with a particular parent,
    as opposed to that parent's right to make major decisions affecting the child.
    In our view, assuming that the order or agreement imposes a liability on Mom
    and Dad for their respective specified child support amount (as opposed to
    one liability being imposed on Dad for the net amount), Mom may be entitled to
    claim the equivalent-to-spouse amount for Dave and Dad, for Jane.

    We trust that the foregoing comments are of assistance.
    Yours truly,
    Milled Azzi, CA
    for Director
    Business and Partnerships Division
    Income Tax Rulings Directorate

    Leave a comment:


  • short_skirts
    replied
    Originally posted by Mess View Post
    Yup, it's all about the other parent contesting it. Although it would have been smoother if you'd both signed a letter agreeing to the facts of the situation, that's what my ex and me did. But what you've done isn't "wrong" and this will have to work itself through and your ex will look like an ass.
    Smoother I agree! However we knew that the ex would never agree (obviously, as it's being contested now!), so just jumped in. Thanks!

    Leave a comment:


  • today
    replied
    I have to disagree.....in my case right now as I write, my ex and I are going through exactly the same thing. She received "the letter" from CRA requesting details and written confirmation of our arrangements which is 50/50 week to week. For no apparent reason.

    She receives all benefits relating to the children and I agree with it 100%. I sent a letter of confirmation on her behalf confirming this. I want her to continue to receive all benefits possible other wise I will most certainly end up picking up the slack out of my pocket.

    It seems that more and more people are being ask for clarification on this, thus losing benefits.

    A decision has not been made yet although if it is the law I suspect they will have no choice but to split the benefits. Not happy about that!

    Leave a comment:


  • Mess
    replied
    Yup, it's all about the other parent contesting it. Although it would have been smoother if you'd both signed a letter agreeing to the facts of the situation, that's what my ex and me did. But what you've done isn't "wrong" and this will have to work itself through and your ex will look like an ass.

    Leave a comment:


  • short_skirts
    replied
    So basically, in everything I'm reading, CRA won't dispute a shared parenting situation unless one of the parents disputes the claim? We found out that we were going to get the CCTB (after the children being with us 50% of the time for two years), and a month later we got a letter stating that they were reviewing the case and to provide a large amount of information (had previously sent the custody orders). So, CRA really doesn't care, it's the other parent (who is obviously losing half of the CCTB) that is creating the case? Even the person we spoke to at the CCTB was shocked to see it being reviewed one month after being approved.

    Leave a comment:


  • billiechic
    replied
    They are the government...as long as there is agreement from the parents They won't waste time trying to find out the details.

    Leave a comment:


  • Foredeck
    replied
    If there's a dispute between the two parents, CRA would investigate it further.

    However, everything seems to indicate that if both parents stay quiet, CRA will not waste ressources investigating anything and will let people "abuse" or bend the rules slightly on this for now.

    Leave a comment:


  • dadtotheend
    replied
    Originally posted by Mess View Post
    The CRA doesn't ask for copies of custody orders.

    I do believe that if you change access levels it gets a bit trickier, and they do write follow up letters asking for clarification but they don't ask for custody orders.
    OH YES they do!! I've seen it many many times.

    Leave a comment:


  • Mess
    replied
    Originally posted by Foredeck View Post
    I do believe you need shared custody in order for CRA to accept it.

    By CRA's standard, there is no difference between having your for 5% of the time or 39% of the time.

    I am sure you could sign an agreement with your ex that states you have shared custody and allowed to both claim one child as a dependent, but that CS payments will remain what they are now.

    I am not sure if this would be accepted by CRA if you were audited.
    The CRA doesn't ask for copies of custody orders. They also don't check where your kids are sleeping at night (the exact words of clerk on the CRA help phone line).

    As long as the two parents are in total agreement about their arrangement, then the CRA won't police it. I've been told by my accountant that it would be a nightmare for them to try to police the custody and access of children across the country.

    They would flag a situation where there seemed to be too may claims being made for one child, or if one parent disputed the level of access of the other parent.

    So basicly, if you were audited, they don't audit your child's bedroom at night. It's up to you to decide to tell them if you are at 39% or 40%, as long as the other parent agrees.

    I do believe that if you change access levels it gets a bit trickier, and they do write follow up letters asking for clarification but they don't ask for custody orders. I did get a letter from them asking for confirmation of my daughter's residency (over 60% with me, so considered 100%) and they wanted me to mail them a photocopy of her birth certificate, as though that "proved" anything.

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  • billiechic
    replied
    read this. Don't know if it makes things any clearer though.
    http://www.cga-canada.org/en-ca/AboutCGACanada/CGAMagazine/2003/Jul-Aug/Pages/ca_2003_07-08_dp_taxforum.aspx

    Leave a comment:


  • Foredeck
    replied
    Just read this on the Divorcemate website. If you go down to page 4, they say you can allocate the benefits to one parent. And, that CRA will not actively pursue it.

    <cite>www.divorcemate.com/library/SharedParenting.pdf
    </cite>

    Leave a comment:


  • Foredeck
    replied
    I do believe you need shared custody in order for CRA to accept it.

    By CRA's standard, there is no difference between having your for 5&#37; of the time or 39% of the time.

    I am sure you could sign an agreement with your ex that states you have shared custody and allowed to both claim one child as a dependent, but that CS payments will remain what they are now.

    I am not sure if this would be accepted by CRA if you were audited.

    Leave a comment:


  • Cobourg
    replied
    That is exactly what I was hoping to achieve.
    Not sure if I will be talking to someone who is willing to listen and participate in the process or the usual bitter ex that is extremely difficult to get along with at the best of times.

    Thanks for the help and info. We will see what happens.

    Leave a comment:

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