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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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  #1  
Old 01-28-2014, 10:09 AM
seekinghelp seekinghelp is offline
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Default 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 :-(
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  #2  
Old 01-29-2014, 10:13 AM
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Quote:
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...


Quote:
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.
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  #3  
Old 01-29-2014, 10:59 AM
Links17 Links17 is offline
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Quote:
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.
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Old 01-29-2014, 11:57 AM
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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.
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  #5  
Old 01-29-2014, 11:58 AM
FightingForFamily FightingForFamily is offline
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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.
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  #6  
Old 01-29-2014, 12:19 PM
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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....
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  #7  
Old 01-29-2014, 02:04 PM
Serene Serene is offline
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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.
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  #8  
Old 01-29-2014, 02:41 PM
FightingForFamily FightingForFamily is offline
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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.
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  #9  
Old 01-29-2014, 03:16 PM
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It was thanks to this board that I had my agreement written in the correct manner.
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  #10  
Old 01-30-2014, 10:10 AM
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Quote:
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.
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