Is this tax law fair and equitable or just hypocritical?

[PoliticalNick]

So here is the situation.

I am separated from my wife and in a relationship with another lady who is separated from her husband. Now apparently we should be filing as common-law spouses BUT only due to the fact she has custody of her children. The tax law says that if there are no children we should file as separated (single) but if there are children we should file as common-law (married). The only reason for this as explained to me by a tax professional is so she cannot claim the 'equivalent to spouse' deduction for one of her children. In other words the law is designed to garner the maximum revenue for the govt and is applied differently in each circumstance to ensure we pay the maximum amount.

Is this a fair & equitable law?

The other side of this is the fact we are both still legally married yet Revenue Canada wants to recognize us as married to each other. Does this not mean that while bigamy is illegal in Canada it is sponsored by the govt in order to collect extra taxes. I find this the most distasteful hypocrisy I have encountered in a long time.

So what does everyone here think about this? I am interested in hearing your opinions.

 

[Goober]

So here is the situation.

I am separated from my wife and in a relationship with another lady who is separated from her husband. Now apparently we should be filing as common-law spouses BUT only due to the fact she has custody of her children. The tax law says that if there are no children we should file as separated (single) but if there are children we should file as common-law (married). The only reason for this as explained to me by a tax professional is so she cannot claim the 'equivalent to spouse' deduction for one of her children. In other words the law is designed to garner the maximum revenue for the govt and is applied differently in each circumstance to ensure we pay the maximum amount.

Is this a fair & equitable law?

The other side of this is the fact we are both still legally married yet Revenue Canada wants to recognize us as married to each other. Does this not mean that while bigamy is illegal in Canada it is sponsored by the govt in order to collect extra taxes. I find this the most distasteful hypocrisy I have encountered in a long time.

So what does everyone here think about this? I am interested in hearing your opinions.

Spend 100 bucks and take it to Tax Court. That is all it costs. I would look for tax court rulings on this matter before taking this route.

 

[Ron in Regina]

You two are both married but separated from your spouses and currently live with each other?

She (I'm assuming) has at least two children that (the two of you living together currently support)
are in your shared household?

Why doesn't she declare one of the children as 'equivalent to spouse' for that deduction, and you
claim another of the children as 'equivalent to spouse' for that deduction also? That's what makes
sense to me anyway....but I'm not an accountant.

Wouldn't that benefit they household....and the Gov'ts would still suckle from your financial teats
regardless of how you claim....they'd just get less or more, but they'll still get something.

 

[taxslave]

It's illegal to grow pot too but if you declare your income from it CCRA can't steal your property on the grounds of illegal gains.

 

[JamesBondo]

It's illegal to grow pot too but if you declare your income from it CCRA can't steal your property on the grounds of illegal gains.

yet, it is illegal to avoid paying taxes on any source of income, even if it is illegal income.

 

[damngrumpy]

Don't we live in a wonderful country full of contradictions? This country was built of contradictions
so nothing surprises me.
I would file according to the government demands while investigating the legitimacy of the governments
approach.

 

[Goober]

yet, it is illegal to avoid paying taxes on any source of income, even if it is illegal income.

Yes and no- At one time in Canada if you robbed 1 bank you did not have to declare income tax. If you robbed 2 or more than you had to file.
From an old TV show- This is the law.

 

[PoliticalNick]

You two are both married but separated from your spouses and currently live with each other?

She (I'm assuming) has at least two children that (the two of you living together currently support)
are in your shared household?

Why doesn't she declare one of the children as 'equivalent to spouse' for that deduction, and you
claim another of the children as 'equivalent to spouse' for that deduction also? That's what makes
sense to me anyway....but I'm not an accountant.

Wouldn't that benefit they household....and the Gov'ts would still suckle from your financial teats
regardless of how you claim....they'd just get less or more, but they'll still get something.

That is the issue Ron. She was going to claim a child as equivalent to spouse and was informed she couldn't as revenue Canada considers us 'common-law' the minute we cohabit but ONLY so she cannot make that claim. If there were no children involved revenue Canada requires 1 year before they determine us as common-law. I see this as punitive and based solely on disallowing her claim to reduce taxable income.

 

[Ron in Regina]

"The Minute" you cohabit? That's pretty intrusive.

I get the impression the SLM wouldhave some input on this situation. I think
I'll pop her a LINK to this Thread to see if she has an opinion on this for the
next time she's play'n on the Forum.

 

[SLM]

"The Minute" you cohabit? That's pretty intrusive.

I get the impression the SLM wouldhave some input on this situation. I think
I'll pop her a LINK to this Thread to see if she has an opinion on this for the
next time she's play'n on the Forum.

Essentially that's what it is though.

Marital status

has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support.

It's because you are considered to be a parent to each others children, in other words a "factual" adoption.

IT-419R2 - Meaning of Arm's Length

In determining whether an individual is a parent of their partner's child, paragraph (b) of the definition of “common-law partner” does not restrict such a determination to the natural child of the partner. Consequently, subsection 252(1) characterizes each individual as a parent of a child when there is a legal or factual adoption of that child. When the facts substantiate that an individual is the adoptive (see ¶ 10) parent of the child of an individual with whom the individual is living together in a conjugal relationship, both individuals would be considered to be the parents of the child and a common-law partnership will be considered to have begun at that time, which could be at the time that the couple began to live together conjugally, or it could be after that time.

At any rate this is only a consideration in the first year because, without dependent minor children involved, you are considered common law after living together for twelve months anyway.

 

[PoliticalNick]

Essentially that's what it is though.

Marital status

It's because you are considered to be a parent to each others children, in other words a "factual" adoption.

IT-419R2 - Meaning of Arm's Length

At any rate this is only a consideration in the first year because, without dependent minor children involved, you are considered common law after living together for twelve months anyway.

I still think this is totally screwed. By declaring us as common-law (married) when we are both legally married to others means Revenue Canada is not only supporting, but demanding a bigamist relationship and only to ensure they collect maximum taxes. I am seriously considering a legal challenge to this on the grounds bigamy is illegal in Canada therefore I cannot be 'married' to another even for tax purposes.

 

[Dexter Sinister]

Ah, but the Canada Revenue Agency is pretty much a law unto itself. I've worked with some CRA people (for as short a time as possible) and you're exactly right, the rules are designed to extract the maximum amount of revenue. Did you notice a few years ago when the tax forms switched from giving you tax deductions to giving you tax credits? Let's imagine some numbers here:

Suppose there are two tax brackets, 15% on the first $40,000 of taxable income and 20% on the rest, your income is $50,000 and you have $10,000 in deductions. There was a time when the calculation would have gone like this:

income: $50,000
less deductions: -10,000
taxable income 40,000
tax at 15%: 6,000

Then they changed it to this:

income: $50,000
tax at 15% on first $40K: 6,000
tax at 20% on next $10K 2,000
Total taxes: 8,000
less 15% of $10K deductions: -1,500
tax owing: 6,500

They rob you of an extra $500 just by changing the arithmetic around a bit. And then they changed it again, to this way:

income: $50,000
less 15% of $10k deductions: -1,500
taxable income: 48,500
tax at 15% on first $40K: 6,000
tax at 20% on next $8.5K 1,700
tax owing: 7,700

Robbed you of $1200 more that time, or $1700 overall. With no change in income, deductions, or tax brackets, you go from paying 12% of your total income in taxes, to 13%, and then 15.4%, all they did is change the accounting.

 

[Cannuck]

Never trust an accountant.

 

[SLM]

I still think this is totally screwed. By declaring us as common-law (married) when we are both legally married to others means Revenue Canada is not only supporting, but demanding a bigamist relationship and only to ensure they collect maximum taxes. I am seriously considering a legal challenge to this on the grounds bigamy is illegal in Canada therefore I cannot be 'married' to another even for tax purposes.

Challenge it if you want to, by all means. To the very best of my knowledge though it is a tried, tested and true definition and I, in all honesty, don't think you'll get anywhere with it.

Here is a link to court rulings with respect to the eligible dependent tax credit, you might want to look through them.

CanLII - Canada (Federal) - Tax Court of Canada

 

[captain morgan]

That is the issue Ron. She was going to claim a child as equivalent to spouse and was informed she couldn't as revenue Canada considers us 'common-law' the minute we cohabit but ONLY so she cannot make that claim. If there were no children involved revenue Canada requires 1 year before they determine us as common-law. I see this as punitive and based solely on disallowing her claim to reduce taxable income.

Essentially that's what it is though.

Marital status

It's because you are considered to be a parent to each others children, in other words a "factual" adoption.

IT-419R2 - Meaning of Arm's Length

At any rate this is only a consideration in the first year because, without dependent minor children involved, you are considered common law after living together for twelve months anyway.

My question is this:

Would it have been possible for Nick to claim that he was simply renting a room from this woman and not suggest that they were 'living together'?

 

[taxslave]

My question is this:

Would it have been possible for Nick to claim that he was simply renting a room from this woman and not suggest that they were 'living together'?

Not if they had a joint bank account or loan with both names on it.

 

[L Gilbert]

So here is the situation.

I am separated from my wife and in a relationship with another lady who is separated from her husband. Now apparently we should be filing as common-law spouses BUT only due to the fact she has custody of her children. The tax law says that if there are no children we should file as separated (single) but if there are children we should file as common-law (married). The only reason for this as explained to me by a tax professional is so she cannot claim the 'equivalent to spouse' deduction for one of her children. In other words the law is designed to garner the maximum revenue for the govt and is applied differently in each circumstance to ensure we pay the maximum amount.

Is this a fair & equitable law?

The other side of this is the fact we are both still legally married yet Revenue Canada wants to recognize us as married to each other. Does this not mean that while bigamy is illegal in Canada it is sponsored by the govt in order to collect extra taxes. I find this the most distasteful hypocrisy I have encountered in a long time.

So what does everyone here think about this? I am interested in hearing your opinions.

RevCan works in mysterious ways. Those mysterious ways neither have to make sense nor do they have to be fair.

 

[JLM]

RevCan works in mysterious ways. Those mysterious ways neither have to make sense nor do they have to be fair.

Just like the old wh*re in North Vancouver who was never bothered until one year she didn't file income tax.