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Hi I've been living with my boyfriend for 2 years but we file our taxes separately. We don't want to file as common law because I think it is a disadvantage when it comes to paying taxes. Now we want to buy property together (so far we've been renting) but I'm worried if we do that somehow the government will find out and "force" us to file as commonlaw. How can I avoid this happening? I've heard something about being tenants in common rather than having a joint mortgage. Also, if we open a joint bank account to pay the mortgage will the goverment know?

Thanks!
 

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I doubt that CRA checks who purchases homes, unless you are in that business. The problem is that the GST credit (if you get one) is available as only one per household. If both of you have been collecting the GST credit on your own, or if one of you has been collecting based on one income, then you will owe back GST credit, if and when CRA finds out. And they will collect. Also, bear in mind, that if a child is involved, you are considered c/l from the date of birth, if the child is his and if you are living together. Owing back CTB and the related benefits can be costly.

The rules say that you are considered c/l after 12 months of co-habitation (if no children are involved). Not reporting this situation is considered tax evasion, not tax deferral.
 

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thanks stardancer. I'm not collecting GST checks and no children are involved. just don't want the government involved in my relationships!! or in my pocket! ;) tax evasion.. that sounds bad though
 

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CRA doesn't "check who buys homes" but they do correlate addresses and SINs. At some point you may receive a letter asking you to confirm your marital status.

FWIW, I can't think of any financial advantage to you filing separate returns (based on the info you've provided) and can think of tax benefits you may be foregoing.
 

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tax evasion.. that sounds bad though
And filing as single when you know that you are not (IMO) qualifies as criminal tax evasion. Did you want a criminal record?


239. (1) Other offences and punishment — Every person who has

(a) made, or participated in, assented to or acquiesced in the making of, false or deceptive statements in a return, certificate, statement or answer filed or made as required by or under this Act or a regulation,

(b) to evade payment of a tax imposed by this Act, destroyed, altered, mutilated, secreted or otherwise disposed of the records or books of account of a taxpayer,

(c) made, or assented to or acquiesced in the making of, false or deceptive entries, or omitted, or assented to or acquiesced in the omission, to enter a material particular, in records or books of account of a taxpayer,

(d) wilfully, in any manner, evaded or attempted to evade compliance with this Act or payment of taxes imposed by this Act, or

(e) conspired with any person to commit an offence described in paragraphs (a) to (d),

is guilty of an offence and, in addition to any penalty otherwise provided, is liable on summary conviction to

(f) a fine of not less than 50%, and not more than 200%, of the amount of the tax that was sought to be evaded, or

(g) both the fine described in paragraph (f) and imprisonment for a term not exceeding 2 years.
 

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We don't want to file as common law because I think it is a disadvantage when it comes to paying taxes.
Thanks!
As others mention above, I can't think of any financial benefit to avoiding the common-law designation. It is not a disadvantage.

Stick to the rules with the CRA - it's less painful than the alternative.
 

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I believe there are a few advantages to filing separately, if one individual has a very low income (it's been a long time since we so filed). Some of the low income earner rebates (GST refund, etc) which are unavailable if joint incomes are too high come to mind.

However, most of would prefer to earn enough that these rebates don't apply.

Therefore, I concur that I see few to no advantages to filing as individuals, and many disadvantages to having CRA discover the relationship is different than claimed. I would expect an investigator, on discovering this subterfuge, would apply greater scrutiny to that taxpayer's return.

My $0.02,
 

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I can definitely elaborate on a few points about why you might not want to file as common-law.

1) Lower income person can get the GST benefits as pointed out
2) Access to assistance such as student loans/grants/scholarships, which you could otherwise be denied due to joint income
3) Depending on how your personal income sharing works out between you and your partner, the lower income person can get the short end of the stick.
4) I find the definition of "common-law" to be very narrow and shortsighted in many ways.

I speak from experience...my partner and I keep our incomes fairly separate sharing only a single bank account, and a property (which has a legal document in place in case we choose to go our own separate ways). I make considerably less, as in about 65% less then my partner. Filling as common-law hurt me, I lost my GST checks, and access to any student funding for current and any future schooling. I used to get 3K+ a year in funding under my single status.

For the record we filed as common-law effective the date of purchase on our house.

So what are the benefits of filing as common-law then? Just curious.
 

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The main benefit of filing as common-law if you meet the definition of common-law is that you are not breaking the law.

Other than that, there are income-splitting opportunities that are available to spouses. Many of them have been outlined in two recent threads here.

In addition, there are a number of tax credits that can be split or shifted between spouses, or only claimed by spouses. Off the top of my head, these include:

- spousal credit
- medical expense credit
- charitable deductions credit
- kids' fitness credit can be claimed by either spouse
- a spouse with no taxable income and taxable dividends can shift the dividends to the other spouse
- age amount, disability amount, education, tuition and textbook credits
- infirm adult credit, caregiver credit
- public transit amount, amount for children, adoption expenses
- LSIF credit can be claimed by either spouse if LSIF is purchased in a spousal RRSP

Oh, and there are spousal RRSPs. And retired spouses can split registered pension income, and CPP.

Many of these situations may not apply to you, but there lots of big and small ways in which you can use the tax system to your advantage and legally reduce the amount of tax you pay.
 

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The other problem, it occurs to me, is that unless you plan to not reveal your martial status to CRA ever, you are going to be faced with a problem when you decide to tell them you are (common-law) married.

Here's why: if you decide to file as common-law in some future year, you will need to indicate that your marital status changed over the past year. But if you've already each been filing with the same home address for several years at that point, they will very easily be able to match up your files and see how long, in fact, you've been living together, and when you actually fit the legal definition of common-law spouses for tax purposes.

As a matter of tax policy there should be no strong incentives or disincentives associated with particular family forms (inducing people to get married, for example). And there are no strong incentives either way in Canada, student grant eligibility and GST refund cheques notwithstanding.

However, for better or for worse (hee), while we file taxes in Canada separately, the family is the economic unit for tax purposes - and all social welfare benefits are calculated on a household or family basis. So, if you ever think you are going to take advantage of those programs (and the main ones are associated with having children), or if you ever want to optimize your tax situation by taking advantage of income-splitting or the credits which can be diverted or split between spouses, then it is worth your while to file your taxes accurately.
 

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or if you ever want to optimize your tax situation by taking advantage of income-splitting or the credits which can be diverted or split between spouses, then it is worth your while to file your taxes accurately.
Can you tell me more about income-splitting & credits? We're a childfree household, and so nothing relating to children applies.

Perhaps I should start this as a new thread?
 

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All this discussion of advantage or disadvantage misses the point ... whether you file separately or as common-law is NOT a matter of choice ... it is clearly defined, in unequivocal black and white, in the law ... you MUST file as common-law, if you meet the definition of common-law in the Act, which it appears that you do.

If there is any choice to me made, it is only whether you choose to abide by the law or break the law ... and if you have no qualms about breaking the law, then there is no end of creative things you could fraudulently claim ... scamming low-income benefits seems kinda small-time when you consider the possibilities.

Surely the miniscule upside offered by scamming low-income benefits isn’t worth the potential downside? I seriously doubt you’d go to jail or anything that severe, and I don’t see how a tax-evasion argument could be made to stick (since you’re not evading taxes, but scamming benefits) but you could end up on CRA’s watch-list for the rest of your life.
 
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