Why does Your Marital Status Matter for Taxes?

I get this question a lot. People who are married usually just assume that they have to file together as they’re married, and that’s correct. However, those living together, but not married, must also state their marital status to Canada Revenue Agency (CRA). And, you must file as common-law if you are in a relationship with the person you’re sharing accommodation.

So why does marital status matter? Your marital status affects your child and family benefits. The Canada Revenue Agency (CRA) uses your family net income to calculate them, so they may change when your marital status changes.

The CRA will recalculate your benefits and credits based on:

• your adjusted family net income
• the number of children you have and their ages
• the province or territory you live in

What is your marital status?

The definitions of the following terms will help you determine your marital status.

Spouse

A spouse is someone you are legally married to.

Common-law partner

You have a common-law partner if you are living in a conjugal relationship with someone who is not your spouse and at least one of the following applies:

• you have been living together for at least 12 continuous months
• this could include any period you were separated for less than 90 days because of a breakdown in the relationship
• he or she is the parent of your child by birth or adoption
• he or she has custody and control of your child (or had custody and control right before the child turned 19) andyour child is completely dependent on that person for support

Separated

You are separated when you start living separate and apart from your spouse or common-law partner because of a breakdown in the relationship. The breakdown in the relationship must last for at least 90 days and you do not reconcile in that time. A separation of less than 90 days is not considered a separation for child and family benefits. Once you have been separated for 90 days, the effective date of your separation is the first day you started living separate and apart.

If you continue to live together and share parental and financial responsibilities, the CRA will not consider you to be separated for administering the CCTB and GST/HST credit legislation.

If the separation is involuntary, you are still considered to have a cohabitating spouse or common-law partner. Involuntary separation could happen when one spouse or common-law partner is:

• away to go to school
• away for work or health reasons
• incarcerated 

How does your marital status affect your benefits and credits?

Canada child tax benefit

If you get married or are now considered to be living common-law, and you or your new spouse or common-law partner has children who live with you, the CRA will put all of the children on the female parent’s account.

If you are married or living common-law with a person of the same sex, one of you will get the Canada child tax benefit (CCTB) for all of the children in the household.

To continue getting the CCTB, you mustfile an income tax and benefit return every year, even if you did not have income in the year. If you have a spouse or common-law partner, they also have to file a return each year.

Goods and services tax/harmonized sales tax credit

If you are married or are considered to be living common-law, only one of you can receive the goods and services tax/harmonized sales tax (GST/HST) credit. The CRA will pay the credit to the person whose return it assesses first. The amount will be the same, regardless of who in the couple receives it.

If you become separated, widowed, or divorced, the CRA will determine your eligibility and tell you if you are entitled to receive the GST/HST credit.

Working income tax benefit advance payments

If your marital status changes, you will need to submit a new working income tax benefit advance payments application. If you do not submit a new application, your advance payments will stop until the CRA receives a new application. The application deadline date is August 31 every year.

What you need to do if your marital status changes

If your marital status changes, you need to tell the CRA before the end of the month after the month your status changed. For example, if your marital status changes at any time in August, tell the CRA about the change by the end of September.

If you have become separated, tell us after you have been separated for more than 90 consecutive days.  You can tell the CRA about your new status and the date of the change by:

• using Change my marital status in My Account calling 1-800-387-1193

If you receive payments based on an incorrect marital status, you may have to pay back any differences in amounts once your status is changed to the current status. The CRA will go back to the month after the month your marital status changed and change your benefits from then. Visit Balance owing - Benefits overpayment for more information.

A Little Story

Dick and Jane met and decided to live together and did so happily for 15 years. Jane had two children from another relationship whom she had full custody, and Dick had one child whom he didn’t have custody. Dick was a much higher income earner, and never qualified for any benefits; however, Jane was a low-income earner with two kids. Of course, they did their taxes separately, and never thought to file as common-law. 

Then one-day Dick gets audited. It wasn’t a particularly nice audit either. The auditor found out that Jane was living in the same house, were in a relationship, and that they had been filing as single. CRA can go back as far as they wish when adjusting returns, if they believe there’s fraud, even if the fraud wasn’t necessarily on purpose. 

Unfortunately, for Dick and Jane, the auditor went back to when they first started living together, less one year, and bounced their returns, and refiled them based on being common-law. Jane being low income had benefited greatly with having two kids and received many benefits. With Dick’s income added onto Jane’s she no longer qualified for those benefits and ended up having to pay back all of the benefits she’d received in those years. In the end, this added up to over $50,000 for the benefits payback and the penalties and interest on those benefits received. Needless to say, Jane didn’t have that kind of money, and they ended up getting a loan to pay it all back.

Your marital status is very important when filing your taxes, and you must be honest, and file with the appropriate status. As you can see it could end up costing you a small fortune later on.