When it comes to your taxes, your marital status plays a crucial role in determining the benefits and credits you may be eligible for. It's essential to inform the Canada Revenue Agency (CRA) when you have a marital status change. Whether you're getting married, living common-law, separated, divorced, or widowed, updating your marital status ensures that you receive the correct benefits and avoids any potential issues with the CRA. In this article, we'll discuss why it's important to update your marital status with CRA and how it can impact your tax situation.
Your marital status directly affects the benefits and credits you may be entitled to. The CRA calculates benefits such as the Canada Child Benefits, GST/HST credit, and the Working Income Tax Benefit based on your combined family income. When you get married or live common-law, your combined income increases, which can result in a decrease in these benefits. Conversely, if you're going through a separation, divorce, or widowhood, your benefits may increase as your combined income decreases.
To ensure that you receive the correct amount of benefits and credits, it's crucial to inform the CRA of any marital status changes promptly. Failing to do so can result in incorrect benefit payments, potential overpayments, or underpayments. If you receive benefits or credits that you're no longer eligible for due to a marital status change, the CRA may require you to repay the amount owed. By staying proactive and updating your marital status as soon as possible, you can avoid these unnecessary complications.
Generally, taxpayers are required to let CRA know about marital status changes by the end of the following month, except in the case of separation as noted below. Hence if you get married in February, you must notify CRA by the end of March. Generally, the following situations require a taxpayer to inform CRA of their marital status change.
If you're living with your partner in a conjugal relationship for at least 12 consecutive months, you're considered common-law for tax purposes. However, there are exceptions to this rule. If you have a child together or have custody and control of a child who depends on your partner for support, the 12-month requirement is waived. In that case, you are considered common-law as soon as you begin living together. It's important to determine the start date of your common-law relationship accurately to ensure that you report your marital status change correctly.
If you have recently tied the knot, whether in a civil or religious ceremony in Canada or another country, you're considered married for tax purposes. Even if your spouse lives in another country, you should report your marital status as married on your tax return. When it comes to marriage or common-law relationships, there are added benefits for filing tax returns together.
Married couples are able to enjoy certain tax benefits, such as transferring credits and combining certain credits to enjoy increased tax savings. For example, if you file as a couple, you can transfer certain credits to your spouse as long as you don't need them. These include tuition amounts, disability amounts, age amount, and pension income amount.
Additionally, certain credits can be pooled together so one spouse can claim the total credit such as medical expenses and charitable donations. Combining these credits allows couples to maximize the credit they receive. The biggest benefit resides with couples that receive pension income as there are income splitting opportunities available when tax returns are filed together. It's important to note that these benefits are only available when filing taxes jointly - meaning that both spouses must file a joint return in order for these benefits to apply. That's why it's so important to inform the CRA of any marital status changes promptly - you don't want to miss out on potential savings!
If you have separated from your spouse or partner due to a breakdown in the relationship, the CRA considers you separated. To be officially recognized as separated, you must have lived separate and apart for at least 90 days. Hence if you recently got separated, you will have to wait until the separation lasts for at least 90 days before letting the CRA know. It's important to note that simply living in separate quarters within the same household or continuing to share parenting and financial responsibilities may not meet the criteria for separation in the eyes of the CRA. To ensure that the CRA recognizes your separation, make sure to have separate living arrangements and financial responsibilities.
If you have gone through a divorce or separation and have entered into a new relationship, it's important to understand how your tax filing status may change. While you may be legally separated or divorced from your previous partner, you may be considered common-law with your new partner if you have been living together for at least 12 consecutive months or have children together.
If you have lost your spouse, whether you were legally married or in a common-law relationship, you should report your status as widowed. This marital status change can impact your tax situation and the benefits you may be eligible for.
To update your marital status with the CRA, you have several options:
Remember, when updating your marital status with the CRA, it's essential to review and update your bank account information as well. Ensuring that your money is deposited into the correct account will prevent any delays in receiving your benefits or credits.
Keeping the CRA informed of any marital status changes is essential for ensuring that you receive the correct benefits and credits. Whether you're getting married, living common-law, separated, divorced, or widowed, updating your marital status promptly can help you avoid any issues with the CRA and optimize your tax situation. By understanding the impact of marital status changes and adhering to the CRA's guidelines, you can navigate your tax obligations with confidence and peace of mind.
Remember, it's always a good idea to consult with a tax accountant or seek professional advice for personalized guidance based on your specific situation. If you are looking for an accountant in Hamilton for professional guidance, contact us today. We are here to help!
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The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting/tax professionals. NBG Chartered Professional Accountant Professional Corporation will not be held liable for any problems that arise from the usage of the information provided on this page.