What is A CRA Marital Status Audit?
Why would a CRA marital status audit occur, what can you do if the agency comes calling, and how this could affect your tax bill. Here are the answers to all those questions.
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Is the CRA Auditing Your Marriage?
Finding out that you’re being audited by the Canada Revenue Agency (CRA) can be confusing and scary. It can feel very intrusive, and even unfair. You might be worried that the CRA will charge you with a very high tax bill, or even potentially seek criminal charges against you.
There are many reasons why the CRA may decide to audit a taxpayer. One of these is what is commonly known as a “CRA marital status audit.” This means that the CRA requires more information about your marital status. For instance, you may be audited if you have frequently changed your marital status, or if other taxpayers at your address have not been consistent in how they reported your relationship.
The CRA and Marital Status
The CRA considers any couple that has lived together in a conjugal relationship for 12 consecutive months to be in a common-law relationship. If you have a child with another person, you are considered to be in a common-law relationship as soon as you start living together. If the person you are living with has custody or control of your child, and your child is dependent on that person for support, the CRA considers you to be in a common-law relationship. Same sex couples and couples of the opposite sex are both treated the same way for income tax purposes.
There are tax implications associated with your marital status, and thus you are required to disclose your marital status on your taxes. In general, you should update the CRA as soon as your marital status changes. The agency requires that this be done by the end of the month following a change in your marital status.
If your marital status changes due to a breakdown in the relationship you must inform the CRA on your tax return. If you were legally married, you do not need to be separated for 90 days before being considered separated for tax purposes. If you were in a common-law relationship, you must wait 90 days from the date of your separation to be considered legally separated.
If a couple is separated involuntarily, such as a situation where one partner moves away for work or school, you are still considered to be legally married or in a common-law relationship as there has been no breakdown in your relationship.
Why a CRA Marital Status Audit May Happen
A CRA marital status audit can occur when the CRA has questions about your relationship and how it relates to your tax situation. The agency may audit you and your partner and require more details on your living situation if the agency doubts that you are being truthful about your marital status.
There could be many different tax implications at play as it relates to your marital status. For instance, a couple could file as two single individuals – rather than as a married couple – so that they can receive HST credits and other credits that they may not qualify for otherwise.
If you are contacted by the CRA and you are required to explain your marital status, it is a good idea to speak with a professional. A tax professional can help you better understand your situation, communicate with the CRA on your behalf, guide you through the CRA marital status audit process, and assist you with providing documentation and other proof to support your case. Contact us today to find out how we can help.
Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:
- 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
- 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
- 3| Offer a complete solution to your tax problems, including ex-CRA professionals and tax lawyers from Farber Tax Law.