In Collaboration with Justice Canada, the Canada Revenue Agency and Finance Canada, the Canadian Bar Association has updated their popular Tax Matters Toolkits. These documents are useful for clients going through separation and divorce. The documents also help family law lawyers understand how tax rules might affect a client's future finances on separation or divorce. Various tax credits, benefits and deductions are described.
More specifically, here is what is covered in each Toolkit:
Tax Matters Toolkit (for clients)
WORKING WITH THE TAX SYSTEM
Thinking about the tax consequences
Asking questions
Keeping receipts and important information
Filing tax forms
Getting advice
Definitions
IMPORTANT CRA FORMS RELATED TO SEPARATION AND DIVORCE
About a change in marital status
About support payments
About RRSPs, RRIFs, and SPPs
Tax Matters Toolkit (for lawyers)
SEPARATION AND THE CANADA REVENUE AGENCY
Filing the T1 Annual Income Tax Return
Notifying CRA of a change in marital status
Documents supporting Change in Marital Status
When are you Living apart?
Same house/separate living quarters
Couch surfing/no new fixed address
DEDUCTION FOR LEGAL FEES
Legal basis for deduction of legal fees
CRA approach
PRINCIPAL RESIDENCE" RULES
"Principal residence" criteria
Issues at the time of separation or divorce
SPOUSAL SUPPORT
Characteristics of spousal support
Spousal support is paid before there is a written agreement or court order in place
"Specific Purpose" and Third-Party Payments
How to notify CRA of spousal support payments
Spousal support payers – Deductions for spousal support payments
Spousal support recipients – Reporting spousal support payments
Spousal support payers – reducing taxes withheld at the source
Spousal support recipients – increasing taxes withheld at the source
Deductions for the payer – a year of relationship breakdown
ARREARS AND LUMP-SUM PAYMENTS
Tax impact of a lump-sum payment on the payer
Qualifying Retroactive Lump-sum Payments (QRLSP)
Tax impact of a QRLSP on the recipient
CHILD SUPPORT
Tax treatment: written agreements and court orders from before May 1997
Federal Child Support Guidelines
CHILD BENEFITS
Canada Child Tax Benefit
Child Disability Benefit
Eligible dependent credit
Child Care Expense Deduction
Tuition, Education, and Textbook Credit
PENSIONS
Canada Pension Plan
CPP: credit splitting
CPP: end of pension sharing
Payment of taxes at source when pension plan benefits paid
REGISTERED RETIREMENT SAVINGS PLANS (RRSPS) AND REGISTERED RETIREMENT INCOME FUNDS (RRIFS).
Transfer of RRSP or RRIF funds to a former spouse or common-law partner
APPENDIX – DRAFT TAX LETTER