Turbotax: Marital Status Changes

 

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Relevant Material: Changing your marital status has significant implications for your Canadian taxes and benefits, primarily because eligibility for income-tested benefits and certain credits is based on your combined family net income. You must inform the Canada Revenue Agency (CRA) by the end of the month following the change to ensure correct payments and avoid penalties. 

Significance of Marital Status Changes for Taxes
While Canadians file individual tax returns (joint filing is not permitted as in the US), your status affects how much you pay or receive due to combined income calculations for specific benefits and the ability to transfer certain credits. 
Key Impacts:
  • Government Benefits and Credits: Payments for benefits like the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit and the Canada Child Benefit (CCB) are recalculated based on your new family net income. Your benefits may decrease or increase depending on your spouse's income.
  • Transferable Credits: You can transfer unused non-refundable tax credits, such as the spousal amount, tuition credits, and medical expenses, to a spouse to maximize deductions for the couple.
  • Deductions and Expenses: Medical expenses and charitable donations can be pooled and claimed by the spouse who can use them most effectively to reduce the overall tax bill.
  • RRSPs: Spousal Registered Retirement Savings Plans (RRSPs) allow the higher-earning spouse to contribute to a plan for the lower-earning spouse, which can offer tax-planning advantages.
  • Asset Division/Sale: In the event of a separation or divorce, rules apply to the division of assets, such as a home sale, which can have capital gains tax implications. 
How TurboTax Helps
TurboTax software is designed to manage these complexities for Canadian taxpayers. 
  • Coupled Returns: TurboTax offers a "coupled returns" feature that allows you to prepare both spousal returns simultaneously. The software automatically identifies which credits and deductions should be claimed by which partner to minimize your collective taxes owed and maximize refunds.
  • Status Update Guidance: The software prompts you to enter your marital status as of December 31st of the tax year and guides you through entering your partner's information.
  • Error Prevention: Using the software helps avoid common filing mistakes related to status changes, which can lead to reassessments, penalties, and interest from the CRA. 
Action Required: Update the CRA 
You are legally required to inform the CRA about your status change as soon as possible, and by law, by the end of the month following the change. 
You can update your marital status with the CRA through several methods:
  • Using the "Change my marital status" service in your CRA My Account.
  • Selecting "Marital status" in the MyBenefits CRA or MyCRA mobile apps.
  • Calling the CRA at 1-800-387-1193.
  • Sending a completed Form RC65, Marital Status Change, to the CRA. .. (Google) 
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