Spousal support arrears and refiling tax returns

[ifonlyihadknown]

Hi,

Negotiating with my STBX and her lawyer is asking for arrears in spousal support going back to July 2014.

After registering the separation agreement with CRA, the spousal support is deductible from my income so I would refile my 2014 tax return to get a tax refund on the spousal support amount.

Does anyone know how far back I can go to refile my return? (A reference would be good.) I'm concerned that if we don't sign the separation agreement during 2015 that I may not be able to get to refund for 2014.

Thanks!

[standing on the sidelines]

How to change your return

[ifonlyihadknown]

"You can ask for a change to a return for a tax year ending in any of the 10 previous calendar years."

I hope there is no exception for spousal support.

[standing on the sidelines]

"You can ask for a change to a return for a tax year ending in any of the 10 previous calendar years."

I hope there is no exception for spousal support.

I would try contacting cra and find out for sure.

[arabian]

You must include your court Order with your filings.

Be sure that the wording is precise in the Order to reflect the deduction you are seeking.

[standing on the sidelines]

Line 230 and 220 - Support payments made

hope this helps some.

[Rioe]

Estimate the amount you'd get back and keep it in mind during your negotiations. Don't just go blindly agreeing with her lawyer that you owe SS.

[ifonlyihadknown]

Actually, because of the amounts involved and my marginal tax rate, I'm actually better off paying and getting the tax refund.

[Rioe]

Actually, because of the amounts involved and my marginal tax rate, I'm actually better off paying and getting the tax refund.

That makes very little sense to me. There is NO WAY that you can be better off by paying SS over not paying it. I'd suggest making sure you understand the math involved before you agree to anything.

Say you pay $30,000 (number obtained from thin air) in SS to your ex for 2014, and then get back half that in taxes for being in the highest tax bracket. You're still out $15,000.

Even if you have to pay a few thousand in lawyers to fight it, it's still better to not pay SS at all. Plus, once you agree that your ex is entitled to SS, it's often a huge fight to turn it off again later.

[ifonlyihadknown]

I've been paying an amount in interim spousal support in after tax income. Once it is official, I may have to pay an additional amount but then the entire amount will become tax deductible. The tax refund when I refile will exceed the additional amount I may have to pay.

[dinkyface]

According to this, lumpsum arrears payments are to be claimed in the year paid. But there are some exemptions permitting them to be claimed in prior years.

Family Law Primer - Spousal Support

Your ex will also have to claim this as income ... not sure if your ex needs to claim in the same year as you.

[sahibjee]

or may be you can just get the judge to agree that the amounts you paid are good enough and then get a refund on those, judge may agree for you to pay less than the guidelines based on circumstances as SS guidelines are not law.

[arabian]

If you agree to pay retro SS for 2014 and the amount is 20k but you pay this in January 2016 you would claim it on your 2016 return. Exception to this would be if, through your negotiations, your ex agrees to claim the amount on the same year that you intend to claim it for. I "think" the two of you have to have corresponding years (payor/payee) on your respective tax returns.

How you pay the retro/arrears SS for 2014 (lump sum or combined with ongoing) should not be misconstrued as a "lump sum" SS award which does not relate to any specific period of time.

It is easy for the wording of an order to incorrectly reflect the outcome of your negotiations/end agreement.

Always good to verify with an accountant if you are unsure.

[arabian]

Something else to consider is what you said in one of your earlier posts: "I've been paying an amount in interim spousal support in after tax income."

CRA looks at this when making their decision.

What happens if/when you go to trial and the SS is recalculated once again.

[ifonlyihadknown]

Good point on the "lump sum" angle as it wouldn't be deductible.