I originally posted this and emailed my MP in 2019, I never received a response. I have updated it and have resent it to the minister of finance. The issue persists.
Dear Minister of Finance:
I am a part-time single mom and a self-employed Chartered Professional Accountant. I work in the Collaborative Practice as a financial specialist to support families as they navigate separation and divorce.
These past six years, I’ve spent considerable time supporting my recently separated clients as they navigate the tax system in Canada. The Canadian Tax System places an excessive and unfair burden on two-household families.
A specific example is the eligible dependant credit granted to single-parent households, worth about $2,600 (in 2021) for each taxpayer or single-parent household.
A taxpayer can claim the eligible dependant credit if they are a single parent and do not have a legal obligation to pay child support.
The Canadian family law and all Provincial family law require all parents to provide financial support to their children based on their respective individual incomes. Every parent has a requirement to pay child support based on their income.
Often, two parents have different incomes, which means that higher-earning parent pays the lower-earning parent more child support. For ease, and because lawyers and judges are not versed in the intricacies of Canadian tax law, lawyers and judges will draft agreements and orders that state the high-earning spouse pays a setoff amount to the lower-earning spouse. That is, instead of each spouse paying the other spouse their child support obligation amount, the two amounts are netted against each other, and the difference is paid to the lower-income spouse.
Suppose lawyers draft the separation agreement using the setoff language. In that case, the CRA will deny the eligible dependant credit to the higher-earning spouse, stating that the higher-earning spouse is the only spouse with the legal child support obligation.
However, suppose lawyers draft agreements whereby each parent pays each other, the CRA will grant the eligible dependant credit to both the higher-earning and the lower-earning parent. In that case, there is no difference between these two families other than one family had lawyers draft a separation agreement knowing the semantics that would satisfy the CRA, and the other family did not. Families going through the high-conflict court system invariably have written orders that use the setoff language.
Here is the CRA’s response when denying the eligible dependant credit to the higher-earning spouse:
When a statutory scheme such as the Federal Child Support Guidelines is used, the payer of the setoff amount is the only individual legally required to pay child support. Therefore, you cannot claim the eligible dependant credit because you were required to pay child support.
My family is one of the families that had a separation agreement that did not pass muster with the CRA. My co-parent and I have been sharing parenting on a fifty-fifty basis since we separated in 2013. I earned less than my husband when we separated, and I continue to make less. When I first filed my tax return post-separation, I underwent a CRA review to prove that I was both separated and had joint parenting of my children. Since then, I have not had any issues collecting the UCC, the Child Tax Benefit, and the Canada Child Benefit.
My co-parent had to go through a much more extensive trial with the CRA as he is the higher-earning male in this situation. First, he had to prove that his children were his children as the CRA automatically defaults the children to the mother’s tax record, always. They do not cross-reference spousal tax records, and so when I told the CRA that we had shared custody of our children and proved it to them, they still made my co-parent do this. And they don’t make it easy to do this. This step does not get done by the majority of families, so most families are losing out on half of their Canada Child Benefit payments. My former spouse was lucky he was married to a tenacious accountant.
Then the higher-earning spouse does not get the eligible dependant credit, just as has happened to my family. I have fought this, though, on behalf of my co-parent, and I have successfully won. My co-parent had his eligible dependant credit denied for the 2015 tax year because our agreement used setoff language. After I responded to his review, was denied again, and then filed a notice of objection, the CRA granted my former spouse the eligible dependant credit. I spent at least ten hours of professional time helping my former spouse. I have learned the ins and outs of navigating the Canadian Tax system as a single parent and as a professional supporting families going through separation and divorce. If it takes ten hours of my time for just myself and I am an expert, can you expect the average Canadian family to persist with this? Only the families with resources can, and the irony is that they don’t need the credit as much as the lower-income families. Ten hours of my time wipes out any benefit the family would obtain for getting this credit.
We won our tax appeal for 2015, but my co-parent was denied the credit again in 2016. So again, I am spending my professional and family time to reply to the CRA review request and then prepare the second notice of objection. I have sent our 120-page separation agreement (which the CRA asks for each and every time we go through this process) to the CRA on seven separate occasions. Where did all the copies go, and why are they not retained with our files? I don’t even want to think where all seven copies of our agreement got to. But that is a different story.
My co-parent continues to be the higher-earning parent, and I have chosen to do paid work on a part-time basis so that our family can have balance. It is not easy being divorced and running two households with children. My co-parent and I are lucky that we have found a way to make it work. My co-parent could use any extra financial help he could get. Our family could. Our family used the eligible dependant credit to support our two children. The credit gives us slightly more financial stability to juggle it all and ensures our children have better childhoods. We want as much financial stability as possible in our family to support our children into their adulthood.
Don’t we want successful adults in Canada? Do we not want to support our families and make it a little easier for them? Why is the Canadian Tax system punishing two-household families? I can say that two-household families have often had to overcome many other hurdles and struggles as they navigated their separation. Why are we making the Canadian Tax system one more challenge they have to manage?
Thank you for reading my lengthy email. I would be happy to meet to discuss this more.
I acknowledge that I live, work and play on the unceded and traditional territory of the xʷməθkʷəy̓əm (Musqueam), sel̓íl̓witulh (Tsleil Waututh) and sḵwx̱wú7mesh (Squamish Coast Salish) peoples.