YOUR BUSINESS ALLY
Seniors: Common-Law or Single?
Must we file our taxes as common-law or can we just file as singles?
The Rules
If any of the following are true, you should be filing as common-law:
- you have been living in a conjugal relationship for at least 12 months, as at December 31, or
- you have a child together, or
- you have custody of your child and your child is wholly dependant on that other person for support
As common-law you are considered a spouse and are entitled to the same benefits as a spouse.
Tax Cost of Filing Common-law
- With no dependant children left the tax cost is zero
- However, some credits calculated by your taxes will be larger for 2 single individuals than one couple
-
- Climate action incentive , for instance
- Guaranteed income supplement
- GST credit
- Child tax benefit
Tax Advantages of Filing Common-law
- may qualify for pension splitting between spouses
- can combine medical expenses for each of you to create a bigger claim than you would have separately
- can combine charitable donations to create a bigger credit than you would have separately
- can contribute to a spousal RRSP
- can claim a credit for a low-income spouse as a dependant
- can transfer unused credits to a spouse such as:
-
- Disability tax credit
- Pension income
- Age credit
- Tuition credits
Other Considerations
- If you claim common-law then you are considered a spouse and can receive spousal benefits on the death of your spouse including:
-
- Top up of your CPP for spousal benefits
- Tax free transfer of RRSP accounts to the surviving spouse
- Tax free transfer of RRIF accounts to the surviving spouse
- Tax free transfer of many other assets to the surviving spouse
- Spousal pension payment
- Eligible for pension survivor benefits
Consequences of Failing to File as Common-law
- Being reassessed. Including interest and penalties, for any over payment of taxes
- Being reassessed. Including interest and penalties, for any over payment of government credits or support payments
- Denied spousal CPP benefits
- Denied survivor pension benefits
Your Declaration
- Your tax return is your declaration of your relationship or lack thereof with the other individual.
- Hard to argue you are entitled to spousal benefits on your deceased partner's estate when you have always filed as single.
Think about all the consequences of your decision. What is easy, simple or expedient is not always in your best interest now or in the future.
Something to think about.
Are you single or common-law?
You tell me.
Let Us Help You
You and your business are unique. There are no one-size-fits-all answers for us business owners. We have to figure it out for ourselves. That said, you don't have to do it alone.
We've carefully listened to business owners for more than 30 years. We've helped them resolve their issues and lessen their stress as their business ally.
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Next article - Wages vs. Dividends (part 2)
Business and Tax Advice
for Alberta's small business owners
from Albertan small business owners
Your Business Ally
Phil Cruickshank
Phil is a Partner at the business accounting firm of Zenally Chartered Professional Accountants LLP.
For more than 30 years, he has sat face-to-face with owners of businesses of all sizes. He has listened to them, helped them identify their issues, and provided guidance.
Business owners have left with answers to their questions, less stress moving forward, and confidence that they have a business ally to call on anytime they need.
Interested in finding out more about Phil, his team and what they can do for your business? Contact us.
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