Re-assessed Taxes After Marital Status Change

Canada Revenue Agency (“CRA”) recently changed my marital status from single to common law since my child was born.  Now I’ve been re-assessed and requested to reimburse them for income tax, child tax benefit and GST/HST credits.  Would bankruptcy erase these debts?

Maybe – CRA may pursue you for fraud and misrepresentation, and if successful, then a bankruptcy will NOT clear you of these debts.  However, in my experience, if you file for bankruptcy, it is unlikely that CRA would pursue you for any fraudulent action and any debt that you owe them would be extinguished when you are discharged.

People are often confused by what constitutes a “common-law” relationship.  In BC, the Family Relations Act definition refers to living and having a child together or lived with another person in a marriage-like relationship for a period of at least 2 years.  CRA only requires one year of living together to be considered in a common law relationship for tax purposes.

This case reinforces the view that when you are married or living common law, that you must disclose your partner’s income on your tax returns and vice versa.  This is the case even if you otherwise keep your finances separate and apart.  Family income is what determines the level of benefits that you receive such as Child Tax Benefit, GST/HST credits and other provincial credits that may be available. It also has an effect on the amount of tax you pay if you claim the child as an eligible dependent (which you can’t).  If you don’t disclose your partner’s income, it may lead directly to the above situation.

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File Your Income Tax Return, You Might Get Money Back

(updated April 2017)

Did you know that just by filing your income tax return, you could receive more money from the federal and provincial governments through tax credits and benefits?

By simply filing your income tax return, a single person may receive approximately $585 more per year, a single parent with one child could receive $4,700 a year, and a two-parent family with two children may receive up to $8,600 more per year.

 By filing your income tax return you could receive:

  • GST/HST Credit
  • BC Low-Income Climate Action Tax Credit

You may also be eligible for other benefits such as:

  • Canada Child Tax Benefit
  • National Child Benefit Supplement
  • Working Income Tax Benefit

Other government departments also rely on your tax assessment to determine whether you qualify for rent or medical service plan premium subsidies.  By not filing your return, they typically find it difficult to provide you that assistance.

It is not illegal to owe the government money on your tax return; however, the Income Tax Act requires that you file your return annually and on time.