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  • Tax Question

    I have a question about claiming children as dependants on taxes.

    I have a bit of a complex situation (though, probably not all that complex): My ex and I have joint custody of our children with 50/50 shared access on a weekabout basis (the 2 children are with her for one week from Monday to the following Monday when they're with me).

    Our agreement states that I am to pay support based on the table amount for shared access, so I pay the difference between what she would pay and what I would pay. There isn't a great income disparity between us, so this works out to just over $200/month that I have to pay her.

    I had to battle CRA to get the CCTC flowing into my account, to prove that I had shared access and joint custody of the children. When they are in my care, I am 100% responsible for their education, health, and any other needs that may come up. I take them to extra-curricular activities. I pay for any school events that come up during their time with me, and I pay for other things like school supplies, shoes and boots, coats, etc, whenever the mother is unable or unwilling to do so.

    We have also signed in the agreement that for tax purposes, each of us would claim one child as a dependant.

    I was audited to prove that I had a child as a dependant in the previous tax year. So, I provided the separation agreement, a signed letter from the school indicating that I have custody of the children for 26 weeks a year, a letter from the mother indicating that she will claim one child for that year, and a copy of a child care receipt showing that I pay for child care for both children during their time with me.

    Well, it turns out, despite that, since I was paying support for the children, I cannot claim them as dependants.

    Is there something that I'm doing wrong with this?

  • #2
    CRA is very picky about this, to the point that they don't make any sense, in applying the rules that they do, in this situation.

    They will nitpick your agreement, because it says "you" pay support. Even though you are really paying offset support, and you both share custody of your children.

    Your order needs to be worded, that you each pay each other offset child support. Check some other threads on here, where people have discussed this before, and provided some wording from their agreements.

    Comment


    • #3
      This is a pretty common problem. CRA will tell you you cannot claim a child for whom you make support payments as a dependent, but actually you can *IF*

      a) you and another person are both required to make support payments (e.g. an offset situation, where technically you are paying each other the table amount); and

      b) no one else is eligible to claim the child; and

      c) you and the other person who pays support can agree who will make the claim. If you can't agree, no one gets to make the claim.

      This means you and your ex need to sign a document stating that you pay each other child support (the magic words here are "pay each other") and that you have an agreement about who will make the claim (e.g. one party will claim in odd-numbered years and one will claim in even-numbered years). I did this and sent a copy to CRA, along with the divorce order showing we had shared custody, and they accepted my claim. The details are here:


      What are the situations in which you cannot claim the amount for an eligible dependant?

      Comment


      • #4
        Yes, what dad2bandm said.

        Your best bet is to update the agreement for the next year according to any change in your incomes. You would probaby do that anyway periodically. Then file a consent order with the updated amounts, and specify a change in wording according to the CRA requirements.

        To do the wording, go to the CRA website and search for "shared parenting." Find the appropriate page with this information displayed. Have this page open, and call the CRA information line. State that you have this page open and read to them what it says.

        I'm not kidding, they will give you untold grief trying to get a straight answer, so the first thing you do is read that page to them. Then ask the question: "What is the wording to put into my agreement to ensure that CRA recognizes my claim for my child as dependant?"

        They will likely escalate you to a supervisor. In any case, ask for a name of the person who supplies you with the information, as well as contact information (phone number, email, etc.) Explain that if your claim is denied, you will need to follow up with someone. Don't hang up until you get a name.

        If this seems like a lot of work, it is. The method I am describing is a fraction of the shit some people have to go through in order to make the dependant claim.

        Comment


        • #5
          How does that help for last year, though? There is a current amendment that says: He pays $x, she pays $x, offset he pays $x.

          Now, I do have a signed letter from her indicating that the support payments have been adjusted to commence January 2013 (I did not pay support at all in 2012...I attempted to handle it privately, but she outright refused, and would rather FRO handle the case).

          I do plan on appealing the CRA decision. When there's only a $10,000 difference between our incomes, why should I suffer not being able to claim dependency of at least one of my children? I'm not in a high tax bracket. I'm a lower-middle class guy, just eking out over $40k/year. It's not like I'm some fancy-suit lawyer, and she's a desperate housewife living on table scraps.

          Comment


          • #6
            Originally posted by notadeadbeatdad72 View Post
            How does that help for last year, though? There is a current amendment that says: He pays $x, she pays $x, offset he pays $x...

            Now, I do have a signed letter from her indicating that the support payments have been adjusted to commence January 2013 (I did not pay support at all in 2012...I attempted to handle it privately, but she outright refused, and would rather FRO handle the case)...

            I do plan on appealing the CRA decision...
            "payments have been adjusted to commence January 2013"
            "I did not pay support at all in 2012".

            What does that mean?

            How is that reflected in any court order you have now, or wording of it? Was any mention of arrears or back-support or any "support" attributed to 2012 mentioned at all in your agreement?

            Why I ask, is that if CRA determines that "support" should have been payable, and they see some mention of this, they will deem it as "you were required to pay support in 2012" and will decline your claim for the 2012 tax year.

            If this has been adjusted for 2013, and your current order has the proper wording, I would think you *should* be good for the 2013 tax year.

            Comment


            • #7
              The initial agreement, signed in 2012, states that I pay $x in support as of April 2012.
              I tried to make these payments privately, by providing her cheques for the amount. She refused the cheques and said, "I will go through FRO."

              I said, "Okay fine. I will wait to hear from FRO."

              In January, 2013, I received a letter from her stating, "FRO will be commencing payment scheduling as of this date. You will not owe any arrears from April 2012 to January 2013. You will only owe from January 1, 2013 to current."

              In July, we had the child support portion amended. It more clearly states: "He pays $x. She pays $x. The offset of $x is to be paid. This will be reviewed in August 2014." So yes, the 2013 tax will be better, because it more clearly states that the amount paid is offset. However, the 2012 agreement is a little more hazy.

              Now, if I get her to sign a letter, for CRA which states:

              1) The initial calculated amount in the separation agreement signed in 2012 is based off the offset amount calculated at: he pays her $x and she pays him $x
              2) That no support payments were received in 2012, and these were set to commence as ordered by FRO beginning January 2013
              3) That she agrees that each of us claim one child as a dependant for the taxation year 2012
              4) That she agrees that we are each responsible for the cost of child care as per joint custody and shared access on a 50/50 basis.

              Will that get CRA off my back for the 2012 cycle?

              Comment


              • #8
                Originally posted by notadeadbeatdad72 View Post
                The initial agreement, signed in 2012, states that I pay $x in support as of April 2012...

                ...Will that get CRA off my back for the 2012 cycle?
                My opinion, no. Because CRA will likely have hard time interpreting all this.

                If your ex signs stating that no child support was to be paid by either of you in 2012 due to shared custody, maybe they would take that?

                I would prefer the amended agreement with the better wording to state that was how thins were since original date. That is clearer to CRA.

                Comment


                • #9
                  Yeah, that's how it is now. Specifically written out:
                  He pays her $x
                  She pays him $x
                  Net payment from him $x

                  Comment


                  • #10
                    Looks like I may have to take this to a living, breathing human being who has more authority than the front-line CRA clerk.
                    I'll appeal it and indicate, providing the letters from her and from myself, that the amount set out on 2012 was based off the offset amount, and not off the table amount. I'll also indicate, and provide the evidence, that any outstanding uncollected support payments were discharged by her, and the payment schedule was set to begin on January 2013.

                    I'll also ask where the country's missing $3b is.

                    Comment


                    • #11
                      I would have left the net payment part out
                      She pays x
                      I pay her y

                      Comment


                      • #12
                        Just a quick update to this...I'm still battling CRA over this. Even the ministers of finance and revenue both agree that if it's based on the offset amount, then one parent can claim the child.

                        My lawyer wrote a letter to CRA specifically spelling out to them how the amount was calculated, and how the agreement was written up, as well as indicating the tax laws which say that I can make the claim. They just got back to me yesterday...haven't had time to peruse the letter, but they need me to sign to agree to let them talk to him about the situation.

                        Sigh...can't CRA just come to the understanding, when they see "shared access" that the support agreement is the offset amount, and not the full table amount?

                        Comment


                        • #13
                          I just wanted to post a follow up regarding this...I've been battling CRA for the EDC since December 2013, and there still seems to be no end in sight.

                          Their stance is that, since the agreement is worded, "The husband shall pay the wife $x..." that they feel that I am the only one legally obligated to make support payments, and that she has no legal obligation to do so. As such, this makes me ineligible for the EDC, despite the fact that family law indicates that in shared 50/50 access, both are legally obligated to pay one another support (though, since my payments are higher than hers, I pay the difference).

                          Perhaps the wording of the agreement should have stated that "the Husband pays $x and the wife pays $y." and some indication that the difference between these two will be collected by the other party.

                          So, just a word of caution when writing out your separation agreements when you have split access to the children to ensure that the details of who pays whom is clearly worded.

                          Comment


                          • #14
                            It's funny. I ran into the exact same issue and posted my findings on this forum several months back. Here is the post if you want to read more (http://www.ottawadivorce.com/forum/f...aration-17016/)

                            I have been struggling with CRA agents and their incompetency on this matter for sometime now. I have done so much research on this subject that I feel like a SME of sorts. I have had to point out to agents their own guidance and documents on this topic. Basically your case will focus around the CRA guideline P102 (specific page 11). I think you are Example 2 like myself.

                            My separation agreement basically stated the offset or difference that I was to pay my ex for child support, since I was the higher income earner. It did not clearly state the fact both me and my ex had child support amounts and how the difference was obtained. Unfortunately all the trial cases related to my situation, would not accept the offset (or difference) as both parents paying. You will not find any assistance from previous cases on this topic, in fact they kinda of contradict P102, I've spent hours researching this.

                            So I built up my case and was waiting for my informal trial date. Then 2 weeks ago I got a call from the tax solicitor stating that CRA has accepted my appeal and it will not be going to court. When I asked why, they basically said that they could not go in to detail on that aspect. I have my own theory as to why but for now I'm happy that my long battle with CRA is over for 2012 and 2013 taxation years. I WON and I can help you.

                            Comment


                            • #15
                              success is possible

                              (Sorry readers for the long response, dealing with CRA is complicated)

                              I’ve read through the tread a couple times and can’t quite understand why your ex would not have accepted payment in 2012 especially if it was captured in the separation agreement. Besides that aspect (let’s just say my ex would never turn down money) our situations are very similar. Although my offset was 4 times what you paid due to salary differences / table amounts. I actually just updated my forum posting on this topic, explaining my successful resolution with CRA.

                              (http://www.ottawadivorce.com/forum/f...aration-17016/)

                              Unfortunately your dealings with CRA agents will most likely not lead to any successful resolution. From my experience with them, they are programmed to say no, to delay, and to pass the buck. The other unfortunate thing is you have to play their game and go through their long drawn out appeals process. I think this is to discourage taxpayers to follow through and accept their decisions even if you have a strong case.

                              I separated in 2011 and claimed one of our 2 kids for that year as an “equivalent-to-spouse” on line 305. There was no issue for that taxation year. I did the same thing for 2012, got back my refund and shortly after received a letter saying they are reviewing my claim. I provided all necessary docs (separation agreement, etc) and received a reassessment letter saying that I cannot claim my child because I made child support payments (118(5) from the Tax Act) and that I owed them back half my refund which was accumulating interest until it is pay off. I called them immediately, absolutely no help whatsoever, they told me to file an appeal. To make a long story short, the formal appeal was no better, no logic, the guy actually agreed with what I was saying but his supervisor wouldn’t do anything, when I asked to speak with the supervisor to plea my case, they wouldn’t let me... absolutely no help. He said you will have to go to the courts... which I initiated, an informal procedure.

                              Over the next several weeks, I spent countless hours searching evidence and putting together arguments in support of my case. Basically I built my case around their P102 guidance doc on Support Payments. If you look at page 11, example 2, it captures exactly my (and your) situation. The CRA agents are oblivious to this document and it’s funny to hear them struggle to counter their argument about not being allowed to claim a child if you make support payments. I had one agent tell me as soon as they hear offset, it’s a no and they do not recognize this as 2 parents having to make payments. Offset is basically the difference (in both parents’ table amounts) which is described in this document. I was able to link my case to Sect 118(5.1) of the Tax Act, 2010 Budget for changes in rules surrounding shared custody parenting, and various tax cases that “somewhat” supported my case.

                              So for me, I had to prove 2 aspects:

                              1. Since my original agreement only captured the offset amount, I had to prove that this actually was a difference of child support amounts for both parents and it was like this from the get go. Therefore meeting the conditions defined on the CRA website, Tax Act (particularly 118(5.1)) and in P102.

                              2. All other similar cases that went to court, there were virtually zero cases that recognized the offset as both parents requiring to make child support payments, as the CRA agent said on previous conversation. I knew I would have an uphill battle with this one, but I thought I could show the contradiction it had with P102. I also thought my case could be precedent setting.

                              One thing that I had going for me, that others may not have, I had/have a decent functional relationship with my ex and we always try to keep the kids interest first. She understood and supported my CRA appeal and actually signed off on amendments and letters in support of my claim.

                              We signed off on an amendment to help clarify to CRA that both of us have a payment and I just pay the offset. Even though CRA suggested doing this, they were unwilling to postdate it back to 2012. After meeting with a Tax Lawyer to go over the case that I put together, they suggested doing a rectification order of the original separation agreement which would have legally dated the change back to the original date. I didn’t have to follow through with this however since it got resolved prior to going to court. (See my other post for more details)

                              So because it got resolved prior to going to court, there was no precedent setting aspect so I know others will run into this issues. Hence, I am trying to share my experience in great detail. My advice is to see it through and good things might happen, although it will be painful and frustrating. I am willing to share more details to those who need it, send me a message. I won't go into too much detail on this point but I think communicating with the Minister of National Revenue and the Taxpayers’ Ombudsman may have helped my case also. (reference other post)

                              Comment

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