Child tax benefits can be point of conflict for separating parents
By AdvocateDaily.com Staff
Understanding the tax implications of varying custody arrangements shouldn’t be overlooked for couples going through a separation, says St. Catharines family lawyer and mediator Sharon Silbert.
“This is particularly important where children are going to be residing with both of their parents on an equal or near-equal basis,” says Silbert, principal of Sharon B. Silbert Professional Corporation.
In what the Canada Revenue Agency (CRA) defines as a “shared custody” situation, the government typically pays each parent 50 per cent of the child-related tax benefits to which they would normally be entitled based on their own household income, Silbert says.
“So it may or may not be equivalent to what the other parent is getting,” she says.
Parents who delay informing the CRA of changes to living arrangements following their separation might have to pay back huge sums of money down the line, Silbert says.
For example, if a mother continues to receive all of the Universal Child Care Benefits and the Child Tax Benefits — soon to be wrapped into one income-dependent Canada Child Tax Benefit — even after implementing a shared residence arrangement with the children’s father, she could have to pay up.
“The CRA has the ability to reassess retroactively, and the father could receive a nice windfall, whereas the mother could owe thousands of dollars,” Silbert tells AdvocateDaily.com.
“It’s one of those things that is easy to forget, but it can have a big impact, depending on your family or income situation. The complications that can arise when child-related tax benefits and credits are not taken into consideration when parents separate provide a good example of why it is so important to think about tax implications of such a major transition.”