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  • Tax Wording for final shared parenting agreement

    I have noticed that there are often discussions about tax credits and such, with many people saying "I wish I had marked that down in the separation agreement".

    I will likely be signing an agreement shortly, and I just want to make sure I have not missed anything. Shared physical custody 50/50.

    1) Separation agreement will state that both parties are paying child support to each other.

    2) Do we have to say something about dependent credit? Benefits being rotated? Anything else I might have missed that I might regret? Kids are both preschool, so any mistake could cost me for two decades

    Thanks!

  • #2
    In particular, what is the "equivalent to spouse" thing, I've read some threads, and I don't really understand it. I need to know what has to be in the separation agreement that myself and the ex share that credit in some way.

    Comment


    • #3
      Check online or at law library. There are desirable wordings. Eqivalent to spouse is now eligible dependent. CRA loves to reject tax deductions. They have many interpretive bulletins. You may have to adjust your agreement if one party only can claim. They can always reimburse other parent for whatever refund they got et .

      Comment


      • #4
        Your lawyer is very likely not an expert in tax law. Call the CRA info line, have a list of specific questions, especially ask them about the wording of your separation agreement/court order.

        We have two children. Our agreement is worded that I will claim the elder child, my ex will claim the younger child, until the elder turns 18. At that time we alternate claiming the younger child. I had a sentence added to state which of would claim the younger the first year we began alternating. I was certain that by the time that came around it would be a new point of contention.

        There is no reason you can't have a series of specific clauses relating to this. I'm not aware of "desirable wordings" in the law library; I couldn't find a divorce lawyer who was fully conversant with the tax implications of shared parenting. They have separation agreements pre-written and basicly use a drop-down menu to select clauses that are appropriate. There was nothing in their experience, their files, or their computer generated agreements that dealt with it.

        Search the CRA website for bulletins, explanations, help pages. Print them out and show them to your lawyer and explain how you want things to be arranged. When you get your draft agreement read the sections very carefully and make sure they say what you want them to say. I had an excellent lawyer with a very experienced team behind her, but they were all clueless about tax law. Once I showed them CRA info and walked them through it, they were smart enough to see it, but it was outside their experience.

        The tax regulations have been changed and clarified fairly recently as a result of several tax court decisions that went against the CRA. As a result, even lawyers who have had clients with Shared Parenting haven't had this brought to their attention. Many divorcing couples wouldn't think of dealing with this. My ex wasn't even going to claim the Eligable Dependant until I told her about it. Her accountant didn't know divorce law.

        Comment


        • #5
          I completely agree with Mess. Most family lawyers won't protect you but if you adopt the wording of the CRA bulletins, you will be ok. But in looking for the effect of lump sum spousal support, I found an article somewhere by a lawyer about tax consequences in family law which was helpful. CRA has some wierd rules for shared parenting.

          Comment


          • #6
            Originally posted by Mess View Post
            ...
            Search the CRA website for bulletins, explanations, help pages. Print them out and show them to your lawyer and explain how you want things to be arranged. When you get your draft agreement read the sections very carefully and make sure they say what you want them to say. I had an excellent lawyer with a very experienced team behind her, but they were all clueless about tax law. Once I showed them CRA info and walked them through it, they were smart enough to see it, but it was outside their experience.

            ...
            Holy crap - hundreds of dollars per hour, that is ALL they do and this board knows more than the lawyers!!!

            What a joke it is to pay someone many times what you earn to not know the simple things like shared custody dependent claim.

            THAT is why I'm self represented and come here often.

            Comment


            • #7
              Originally posted by beebie View Post
              I completely agree with Mess. Most family lawyers won't protect you but if you adopt the wording of the CRA bulletins, you will be ok. But in looking for the effect of lump sum spousal support, I found an article somewhere by a lawyer about tax consequences in family law which was helpful. CRA has some wierd rules for shared parenting.
              This category should add a 'sticky' that states the exact wording that works.

              Comment


              • #8
                some examples of wording would be highly appreciated--2 kids, shared custody. Ones that are as specific as possible while acknowledging the possibility that tax law can change.

                Comment


                • #9
                  I am actually heading to tax court on this exact topic - 2.5 years later I am still fighting CRA's interpretation on my seperation agreement of which a family law judge could easily interpret how child support is paid and who claims who as the dependant which was written by a lawyer with multiple amendents to satisfy CRA and they are still rejecting my income tax claims.
                  Will see if a tax law judge can do the same job as a family law judge. Will keep you posted.

                  Comment


                  • #10
                    Originally posted by Janus View Post
                    I have noticed that there are often discussions about tax credits and such, with many people saying "I wish I had marked that down in the separation agreement".

                    I will likely be signing an agreement shortly, and I just want to make sure I have not missed anything. Shared physical custody 50/50.

                    1) Separation agreement will state that both parties are paying child support to each other.

                    2) Do we have to say something about dependent credit? Benefits being rotated? Anything else I might have missed that I might regret? Kids are both preschool, so any mistake could cost me for two decades

                    Thanks!
                    Simply ask your lawyer to provide you the O'Brien's template for separation agreements. If you have a "good" family law lawyer they will have access to the O'Brien's forms and the template provided as all the wording and jurisprudence is clearly stated for all these clauses of a separation agreement.

                    If your lawyer states they don't know what O'Brien's forms is... Time to find a new lawyer I say...

                    O'Brien's Encyclopedia of Forms Online

                    These standard clauses are found in so many legal resources (like O'Brien's forms!) that it is amazing that lawyers just don't whip out these clauses as they are all quite common and reused every day by *good* family law lawyers.

                    Good Luck!
                    Tayken

                    Comment


                    • #11
                      Originally posted by noblefather View Post
                      I am actually heading to tax court on this exact topic - 2.5 years later I am still fighting CRA's interpretation on my seperation agreement of which a family law judge could easily interpret how child support is paid and who claims who as the dependant which was written by a lawyer with multiple amendents to satisfy CRA and they are still rejecting my income tax claims.
                      Will see if a tax law judge can do the same job as a family law judge. Will keep you posted.
                      Keep us posted!

                      Comment


                      • #12
                        Here's the langauge me Xs lawyer added to our agreement

                        5. Tax Benefits in respect of Children
                        5.1. If it does not impact the availability of medical and dental benefits for a Child, each party shall be entitled to
                        5.1.1. apply for the Canada Child Tax Benefit, Universal Child Care Benefit and British Columbia Family Bonus payment or other benefits paid by the Governments of Canada or British Columbia for the Child that is in their custody, and
                        5.1.2. claim the "equivalent to married" status for income tax purposes arising out of his or her day-to-day care of a Child.
                        5.2. If claiming a Child as a dependent for Income Tax is required to obtain access to medical and/or extended health benefits through an employer, the parent who is eligible to include a Child on their medical and/or extended health benefits plan shall be entitled to:
                        5.2.1. apply for the Canada Child Tax Benefit, Universal Child Care Benefit and British Columbia Family Bonus payment or other benefits paid by the Governments of Canada or British Columbia for the Child that is in their custody, and
                        5.2.2. claim the "equivalent to married" status for income tax purposes arising out of his or her day-to-day care of a Child.
                        5.3. The Child Tax Benefit, Universal Child Care Benefit, Family Bonus payment or other benefits do not affect any child maintenance payable by either party pursuant to this Agreement.
                        5.4. All tax credits, tax refunds, etc resulting from claiming qualifying children :as dependents (including education and tuition tax credits) will be shared equally by xxxx and xxxx regardless of which party actually claims the amounts and receives the refunds.

                        Comment


                        • #13
                          This is a good example of useless wording. Sorry. The ITA as interpreted by CRA overrides any nice wording such as the above if it doesn't conform to the Income Tax Act.

                          I don't think it is "equivalent to married" anymore.

                          Follow Mess's advice; read the bulletins and make sure your agreement conforms with them as to who will claim for which child and when in order to maximize tax benefit.

                          It only takes a few minutes and it is not really your lawyer's job to maximize your tax benefits.

                          A good lawyer will advise as to tax consequences. For example, to claim CCTB, you have to have the child residing with you. In shared parenting , both parents can apply and share the benefit on a rotating basis but they both have to apply and provide a notice to CRA with their application.

                          UCCB goes to parent with children under 6 years old.

                          Amount for Eligible Dependent - only the parent not paying support can claim and that parent must have primary care and control of child and they must be single I think.

                          If you have shared parenting, (and neither parent has a new partner) then each parent can claim one child if there are two chilldren.

                          If there is only one child , then the parent paying child support cannot claim the benefit , and so must write into Agreement that the other parent agrees to pay them half the net benefit of the Amount for Eligible Dependent, which has to be figured out. Hopefully you have an accountant handy.

                          The CRA doesn't care what nice words are in your Agreement if it conflicts with the ITA.

                          Comment


                          • #14
                            whats useless? we agreed to split any tax benefit 50/50 - regardless of how or why, on what basis or to whom CRA provided it. there is no CRA rule that says I can't give it to my X or vica versa... a bit chippy dude.

                            Comment


                            • #15
                              Yes sorry. That paragraph was good. But was it easy to figure out the benefit?

                              Comment

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