Let’s first set the record straight about the requirements that the Canada Revenue Agency (CRA) has in place for married or common-law Canadians as they file their personal income tax returns.
Married and common-law spouses do not file “joint” tax returns. That is a US/IRS option. Each Canadian files their own tax return and indicates their marital status on the return, and who they are married to / living with.
You do not get to decide whether to claim your marital status on our tax return. Once you are married, you must include your spouse. Once you are common-law, to be considered common-law, two people must live together in a conjugal relationship for 12 months or immediately if you have a child together, then you must file as common-law. There is no choice here.
The CRA knows your true marital status based on information you file, credits and deductions you apply to, and based on other information that is sent in which relates to you.
Since your marital status has a significant impact on your return – family incomes are combined for calculating income-tested benefits, such as the GST/HST credit or the Canada Child Benefit.
Couples benefit from combining charitable donations and medical expenses.
NOTE: If you receive benefits you are not entitled to because of an incorrect marital status, you will be asked to repay them, with penalty and interest.
Failing to indicate the correct marital status is tax fraud.
Filing as Married
If you were married in the tax year for which you are filing, you must note your status as married in the “information about you” section of your tax return, including information about your spouse – their name, social insurance number, net income and employment status. If your spouse claims credits, such as the CCB, or GST/HST, or if they owe any payments, you must report that as well.
If you are not married but have a common-law partner, you must report this information as well. As mentioned earlier, to be considered common-law partners, you must have lived together in a conjugal relationship for the last 12 months. If you have lived together for less than 12 months, the CRA considers you common-law partners if you share a child by birth or adoption or if one of you supports the other one’s child.
Disadvantages and Advantages of Filing as Married
If both of you sold a home to buy your home together, only one of the sold properties may be immune from taxes. You may have to pay capital gains tax on assets earned from one of the sales.
However, if you are a married student with extra tuition to deduct, you may transfer your unused deductions to your spouse. Similarly, if your partner’s income is below a certain threshold, you may claim an additional tax credit. You can pool your medical expenses and apply the deduction to the tax return of the partner who can use it more effectively. Charitable donations can also combined.
Filing Coupled Returns
Filling out your partner’s information on your tax return is fairly straightforward, but deciding which credits or expenses to claim on each return can be confusing.
To help, TurboTax offers coupled returns which are prepared simultaneously. All TurboTax programs prompt you to enter information about you and your spouse, and while entering the information, the tax software crunches the numbers and decides who benefits from which credits, optimizing your returns to minimize your overall taxes owed, and maximize refunds and tax credits where possible.
TurboTax also helps you avoid common mistakes that people make when filing returns as married or common-law, which is important because if you file incorrectly, the CRA may reassess your returns, and if you owe additional taxes, may impose additional interest and penalties.
Ending your relationship may change benefits due or payments owed. If you receive the Canada Child Benefit, or GST/HST benefit payments, notify the CRA the month after your relationship has ended. If you separate, you do not have to notify the CRA until the separation has lasted 90 days. You can do this through MyAccount, by completing CRA Form RC65, Marital Status Change, or by contacting the CRA’s general inquiries line to give them the heads’ up.
If you live apart for reasons other than the end of the relationship, you must still file as married. For example, if you live apart due to work, education or medical reasons, the CRA considers you married. Once you marry, even if you divorce, you can never file again as single. Never. Ever.