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  • Claiming kids after separation

    Seems like every year since my ex decided she wanted out of our marriage, the "system" finds another way to affect me financially. I'm sharing this story with you to help those better prepare their separation agreements. I have shared custody of my two kids and we did an amicable separation agreement with a lawyer. As per the norm, my child support is based on both our incomes and since I have the larger salary we agreed that I will just pay the offset monthly. We also agreed with 2 kids that each one of us will claim a child for tax purposes as we met the conditions defined in (Shared custody and the amount for an eligible dependant)

    After 2 years of claiming like this with no issues from CRA, they decided to review my file for 2012 taxes and decided I did not meet the conditions. I was flabbergasted. I knew I met the conditions, so I appealed their decision right away and sent the separation agreement and explained exactly how we match the example defined in the link above. Sadly, they denied my appeal.

    Here was their argument:
    The wording in my separation agreement basically says "child support is based on both our salaries and that I will pay this $$ (the offset) to my ex. and it is to be re-negotiated every year". Because it don't explicitly detail the actual calculation, that is say my amount of child support and my ex's amount of child support and that we agree that I will pay the offset... they will not let me claim a child and that it is written more like the last example on that site. So many months of back and forth and fustration all over a few words missing from our agreement. On top of this I have to pay back over $2500 which has been incurring interest during this appeal process.

    What an impact a few words has had. Make sure you word your agreements correctly. And for the lawyers too, please update your templates to the benefit of parents and their kids. My next step is to amend our agreement for future claims and I'm going to take court action on my preivous claim.. more money and fustration I'm sure.

    The system is broken :-(

  • #2
    Originally posted by seekinghelp View Post
    Seems like every year since my ex decided she wanted out of our marriage, the "system" finds another way to affect me financially. I'm sharing this story with you to help those better prepare their separation agreements. I have shared custody of my two kids and we did an amicable separation agreement with a lawyer. As per the norm, my child support is based on both our incomes and since I have the larger salary we agreed that I will just pay the offset monthly. We also agreed with 2 kids that each one of us will claim a child for tax purposes as we met the conditions defined in (Shared custody and the amount for an eligible dependant)

    After 2 years of claiming like this with no issues from CRA, they decided to review my file for 2012 taxes and decided I did not meet the conditions. I was flabbergasted. I knew I met the conditions, so I appealed their decision right away and sent the separation agreement and explained exactly how we match the example defined in the link above. Sadly, they denied my appeal.

    Here was their argument:
    The wording in my separation agreement basically says "child support is based on both our salaries and that I will pay this $$ (the offset) to my ex. and it is to be re-negotiated every year". Because it don't explicitly detail the actual calculation, that is say my amount of child support and my ex's amount of child support and that we agree that I will pay the offset... they will not let me claim a child and that it is written more like the last example on that site. So many months of back and forth and fustration all over a few words missing from our agreement. On top of this I have to pay back over $2500 which has been incurring interest during this appeal process.

    What an impact a few words has had. Make sure you word your agreements correctly. And for the lawyers too, please update your templates to the benefit of parents and their kids. My next step is to amend our agreement for future claims and I'm going to take court action on my preivous claim.. more money and fustration I'm sure.

    The system is broken :-(
    My order specifically says...


    The parties share custody of the children. In determining the appropriate child support to be paid, the parties have considered the Table amounts for each parent, the increased cost of this shared custody arrangement (including appropriate housing, transportation, and the duplication of toys, equipment and clothes), and the condition, means, needs and other circumstances of each parent and the children. To satisfy each party's obligation to pay child support in accordance with the Guidelines.

    A) The Respondent/Mother shall provide $xxx.xx to the Applicant/Father each month in child support, such amount payable on the first day of each month commencing on the first of the following her departure from the Matrimonial home as per xxxxx.

    B) The Applicant/Father shall provide $xxx.xx to the Respondent/Mother each month in child support, such amount payable on the first day of each month commencing on the first of the month following the Respondent/Mother's departure from the Matrimonial home as per xxxxx.

    C) As a result of the above, the Applicant/Father shall provide a set-off child support payment to the Respondent/Mother in the monthly amount of $xxx.xx payable on the first of the month following the Respondent/Mother's departure from the Matrimonial home as per xxxxx.

    Comment


    • #3
      The system is broken :-(
      The system is DESIGNED to EXACTLY do what it did to you. You tried to loophole it and the system reacted.

      A lot of times people blame the system, it isn't the system. It is the ACTUAL legislation and concepts etc.....

      Divorced Higher Earners are considered free political capital - nobody is going to defend you because you're not cute and you're not poor.

      Comment


      • #4
        The current regulation is a result of a court ruling. The CRA is thus following the wording of the judge's decision. (I used to have it saved, but it's lost and it is a bugger to find.)

        This has nothing to do with legislation, other than that the legislation should have been reworked to clarify the situation according to the judge's decision. It has little to do with "the system" other than the CRA has a duty to collect the proper amount of taxes, not find loopholes for taxpayers.

        The CRA is complying with the court decision to the letter; no more, no less.

        It sucks because family lawyers are not conversant with tax law. Three lawyers I consulted at the firm I had engaged all had no idea this issue even existed. Thus, you won't find the proper wording in pre-written separation agreement templates.

        Shared custody is becoming more common, but it is still the minority of cases. The tax implications are not well known by lawyers and judges.

        Comment


        • #5
          Many people in shared custody situations have this problem. CRA is also VERY new in recognizing shared parenting at all, and only started accepted it in 2011. The agreements I have helped prepare are very detailed and explicit and have been accepted by CRA. Talk to your ex to write an amending agreement to fix that child support section to look more like this:

          46. For the purposes of determining the amount of support to be paid for the children and the parties proportionate sharing of their expenses, the parties confirm that

          (a) P1s annual income is XYZ for 2010;
          (b) P2s annual income is ZYX for 2010;

          47. As the parties agree to share custody, they confirm that they will financially support the children by contributing equally to their combined child support amount in accordance with the Child Support Guidelines.

          (a) P1s table amount is $400 per month for 2010.
          (b) P2s table amount is $600 per month for 2010.
          (c) The parties agree that the total support obligation for the family is the sum which is $1000 per month for 2010, and each party is responsible for $500.
          (d) P2 agrees that P1 is owed the balancing amount of $100 per month in child support.

          Some key points that matter to CRA and why this is decently worded:

          -The child support amounts are taken from Guidelines, not a fixed amount agreed by the parties. This means they are expected to change and can be cross checked for any given year.

          -It explicitly states that BOTH parties are paying for and responsible for child support. CRA has rules that say if only one person is paying support, they are never eligible to claim a supported dependent.

          -It describes a mathematical method for how the support is calculated on any given year.

          -It gives the explicit amounts for the year of the agreement.

          -Further elsewhere in the agreement is the expectation that each year, the parties will sign a new "amending agreement" with updated numbers for the previous tax year.

          Please note that this agreement is not the same as yours, this is not offset, but half-offset, which is more mathematically fair but used less often.

          Comment


          • #6
            The way child support in 97 etc.... was modified was to maximize taxation which is what I meant, by taxing it in the hands of the higher earner first it ends up more in the coffers. The "equivalent to dependant" is a tax savings thus contrary to that....

            Comment


            • #7
              I wonder if you could get your ex to amend the agreement retroactively. This was done in my husband's case for the two years they were separated and he paid money to his wife each month but no spousal support order was ever in place. The SA when created and signed (two years after separation date) actually said that all the money paid to mom was deemed and accepted as spousal support (and likewise childsupport). The exact figure was given. My husband then was able to adjust his taxes as a result.

              Of course, the above assumes that you have a cooperative ex and she will assist you in this regard.

              To note: she could also adjust her own taxes to claim the child you had claimed and were then denied upon advising her of your situation, which she would legally be entitled to do if she didn't want to be cooperative.

              Comment


              • #8
                Both correct Serene. CRA will go retroactively adjust as long as you have properly worded agreements in place that fit their requirements.

                Their requirements ARE publicly available but you need to know to go looking for them in the first place.

                Comment


                • #9
                  It was thanks to this board that I had my agreement written in the correct manner.

                  Comment


                  • #10
                    Originally posted by FightingForFamily View Post
                    ...
                    Some key points that matter to CRA and why this is decently worded:

                    -It gives the explicit amounts for the year of the agreement.
                    I wrote my agreement (not signed) without any specific numbers - it just says we pay each other child support according to the tables.

                    Is it necessary to include any specific support numbers in the separation agreement for the CRA and how do you know this?

                    My agreement states that we exchange receipts yearly.

                    Comment


                    • #11
                      The specific numbers are more critical for FRO than for CRA... but since both are a consideration why not eh.

                      The #1 most important thing for CRA is to make it clear that BOTH parties are paying support to each other.

                      I sign an "amending child support agreement" each year with my ex that includes the new numbers so everything is very explicit. It's just a single page. For third parties organizations a specific child support amount is sometimes relevant and its a lot easier to have it written up in a single page signed agreement than it is trying to dig up old tax returns, go look up table amounts, etc.

                      Also keep in mind the CSG tables do change from time to time (last in 2011 I believe) so even saying "table amount" is not set in stone forever.

                      Comment


                      • #12
                        Update on my situation

                        @Links17 - I was not trying to find a loophole, I was just following the CRA guidelines for eligible dependants with shared custody as stated in the link I provided. My situation right from the get go matches exactly Example 2 on the CRA website. It is simply related to clarification around how we calculate child support in my original separation agreement.

                        @Mess Ė Our agreement was never a result of a court ruling or a judgeís decision. It was an amicable agreement between me and my ex spouse. We paid a lawyer to draft the agreement for us. I have shared custody (50/50) with my ex and we always intended for each of us to claim one of our 2 kids.

                        @FB_ - I am very glad this post has helped you with your agreement... that was the original intent of this posting.

                        @others who posted Ė Thank you very much for your suggestions. I am fortunate from the perspective that both me and my ex try to keep the peace for the sake of the kids. We always made this a priority from the start. I have since written an amendment to our agreement that we both signed, stating exactly how we calculate our child support, using some of the examples provided in this post (see below). I decided to make it retroactive to Dec 31, 2011 as that is when the new child support table amounts came in for Ontario and it covers the period in question. This was done after my appeal to CRA was denied, so the next step is court.

                        Now I am preparing to take my case to the Tax Court of Canada. I was wondering if members of this forum had experience and/or advice for dealing with this court system... or if someone could recommend a good tax lawyer who could help me with this next step.

                        Here is the original wording: (Iím person1)
                        4.2 For the purposes of determining table support for child1 and child2, person2ís annual income in 2010 was $XXXXX.00 and person1ís annual income in 2010 was $XXXXX.00.
                        4.3 Starting on the first day of the month following the closing date of the sale of the matrimonial home and on the first day of each subsequent month, person1 will pay to person2 as child support for child1 and child2:
                        (a) an agreed upon amount of $XXX.00 per month but said amount to be promptly re-examined and renegotiated annually based upon changes in person1ís and person2 's income, and
                        (b) his proportionate share of the special or extraordinary expenses set out in this Agreement until a terminating event or a change in child1's and child2's needs occurs.Ē
                        My signed amendment to the original agreement:

                        4.3 Starting on the first day of the month following the changes made to the Federal Child Support Tables, effective December 31, 2011 and on the first day of each subsequent month, both person1 and person2 will pay child support for child1 and child2:
                        (a) person2 shall provide $XXX.00 to person1 per month but said amount to be promptly re-examined and renegotiated annually based upon changes in person1ís and person2ís income,
                        (b) person1 shall provide $XXXX.00 to person2 per month but said amount to be promptly re-examined and renegotiated annually based upon changes in person1 and person2ís income,
                        (c) As a result of the above, both person1 and person2 as agreed that person1 will provide person2 the offset amount of $XXX.00 per month but said amount to be promptly re-examined and renegotiated annually based upon changes in person1ís and person2ís income, and
                        (d) his proportionate share of the special or extraordinary expenses set out in this Agreement until a terminating event or a change in child1ís and child2ís needs occurs.
                        I tried to keep the wording similar. So do you think I have a case? Will it be a waste of money that I canít really afford, to do the next step with a lawyer? Any help would be appreciated.

                        Thanks

                        Comment


                        • #13
                          Just to clarify a couple things in my last post. The original wording of the separation agreement was not excepted by CRA because it doesn't clearly state that we both pay. I actually agree with that aspect.

                          The issue I have is the fact that we arrived at the original agreed amount with the exact calculation as it is described in the amended text. The $XXX.00 is subsection (a) of the original text is the exact same amount in subsection (c) of the amended text. If it was originally worded like this amendment, the CRA appeals person I was dealing with said it won't have been an issue. He actually advised me to do the amendment like this as well, for future years.

                          So my frustration is around some simple wording that has caused so much stress and financial loss.

                          In your opinion/experience, will a judge look at the original agreement and understand the calculation and realize it was done like the amendment? or will he rule that it wasn't stated correctly, that he has to go with the original wording which doesn't clearly state that we both pay and rule against me? Is there any sense of appealing to this from a moral perspective?

                          Thanks again

                          Comment


                          • #14
                            From what I've seen, you want to refer to specific dates, and use specific amounts, and not make the CRA people have to use their brains.

                            Here is how I would personally rewrite your paragraphs.

                            4.3 Starting on January 1, 2012 both person1 and person2 will pay child support for child1 and child2:
                            (a) Based on their line 150 income of $XXXXX from 2010, person2 shall provide $YYY.00 to person1 per month.
                            (b) Based on their line 150 income of $AAAAAA from 2010, person1 shall provide $BBBB.00 to person2 per month.
                            (c) For simplicity, only the difference in the two amounts will be exchanged. As a result, person1 will provide person2 the offset amount of $BBBB-YYY = CCC.00 per month.

                            (d) The amounts shall be recalculated annually following a prompt exchange of tax return information to determine the updated line 150 incomes. The new amount will commence June 1.
                            If your ex is cooperative, you could get her to sign a letter indicating that this is how it was done all along, and include a summary of past year's numbers with an explicit calculation for each year; the parts a, b, c above for each of the previous years. Then CRA may readjust your past tax returns without having to go to court.

                            Comment


                            • #15
                              I won

                              I actually WON my battle with CRA for 2012 and 2013, hereís my update.

                              To summarize the above, CRA would not let me claim one of my two kids as an ďequivalent-to-spouseĒ under a shared custody separation agreement. They said that my agreement only stated one parent paying child support even though I provided tons of evidence (signed by me and my ex) clearly stating that we both use our incomes when calculating child support payments and therefore we both have child support payments. There was even a statement in there saying that we would each claim a child for tax purposes. My evidence supported the CRA P102 guidelines (page 11) exactly. I even provided them an amendment to our separation agreement, worded similar to the suggestions above.

                              Iíve come to realize that CRA agents are not working for you (the average tax payer) and will try to find excuses and delay processes at every corner in hopes that the tax payer will give up and accept their decision (maybe I was naive). Unfortunate for them I was willing to go the distance and challenge them at every corner.

                              Every CRA agent I spoke with ... their very first comment was... you pay child support, you canít claim the child... then I point them to page 11 of the P102 guideline... their eyes open slightly and they try to introduce another caveat ... like CRA does not recognize the offset amount as both parents paying... I highlight the fact that they are contradicting their own guidelines by saying that... sorry sir we canít do nothing at this level... you must appeal it... wow!! When I ask to speak with their supervisor... sorry sir we canít do that and they would only say the same thing... wow!!

                              So during one of these lovely conversations with an agent, actually took the morning off from work, I was so frustrated after the conversation, I decided to email the Minister of National Revenue (Mrs K-L Findlay) and I ccíd the Taxpayersí Ombudsman (Mr J-P Dube). Letís just say I wasnít expecting too much to happen from that email. This was in May 2014.

                              At this point I had already sent my appeal for the informal procedure with the Tax Court of Canada and was awaiting my court date. Fast forward to two weeks ago, I got a call from a CRA litigator regarding my appeal for 2012, she told me that they have accepted my appeal and will reverse their decision; she faxed the formal docs that I had to sign in order to drop the court case. I had asked her why they reversed their decision and got the normal, sorry but I cannot discuss that aspect. I didnít press it because I was extremely happy they finally realized their own mistakes. A week after I checked the CRA My Account and magically they reversed their decision for the 2013 taxation year and I would be refunded the extra amount for equivalent-to-spouse that they originally took away. Life was great ... I felt victorious after a long drawn out battle with CRA.

                              Then yesterday I got this interesting letter from the Minister of National Revenue, looked authentic, and signed by Mrs. Findlay herself. Cool !! It basically stated that she has forwarded my concerns over to the litigation office and that she made them aware of our correspondence.

                              Then my mind started to speculate. Was it the Minister that actually expedited this appeal to a resolution? Did she influence the process? Why would she influence the process?

                              Hereís my thought. I think if this case got to court it could have been precedent setting, since no other court case has favoured the parent in my situation. If I was able to argue my case and win, it could have future ramifications to the system. The one that denies first, prolongs next and tells you to move on to the next step when they know they are wrong. Yeah they may have to properly award parents their entitled tax claim amount.

                              So Iím not sure if this will help you, my message is ... donít give up... if you feel that you are justified to continue your appeal, do it. If you write your separation agreements correctly, you may get processed correctly or you may not. If itís the latter prepare for a long drawn out battle where common sense is not in play.

                              Another idea is to actually exchange $$ from each parent, with a written receipt so they will no longer be able to argue if the offset (the difference) only means one parent paying child support verse both paying. Although Iím sure theyíll find another excuse to deny your claim. If you like more info, send me a private note and I can go into much more detail.

                              Thanks

                              Comment

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