Question regarding taxes after marrying non-resident

[zafari]

Hi,

Thanks for interesting and informative discussion!

I got married to non-resident in July 2014. i updated my marital status online on CRA website within a month after marriage. and file spousal appl in oct.

my wife was a temporary visiting lecturer (kinda Teacher Assistant). she got paid twice last year (few hundreds bucks). however, no salary stubs, neither contract. but she can get a experience letter from employer.

I'm preparing to file my tax return now,
do I need to have her salary stubs as a proof? or her experience letter from employer would enough ?
what if I use her estimated income? (however, Im trying to get her bank statement of last year to calculate exact figures.)
do I need to calculate her total income of 2014 or just earning after marriage?

 

[zafari]

Hi,

Thanks for interesting and informative discussion!

I got married to non-resident in July 2014. i updated my marital status online on CRA website within a month after marriage. and file spousal appl in oct.

my wife was a temporary visiting lecturer (kinda Teacher Assistant). she got paid twice last year (few hundreds bucks). however, no salary stubs, neither contract. but she can get a experience letter from employer.

I'm preparing to file my tax return now,
do I need to have her salary stubs as a proof? or her experience letter from employer would enough ?
what if I use her estimated income? (however, Im trying to get her bank statement of last year to calculate exact figures.)
do I need to calculate her total income of 2014 or just earning after marriage?

moreover, I have remittances receipt as a proof of financial support to her

 

[blueangel371115]

so what if you are only married for 2 months in a tax year, do you really need to change your status to married for that year?

brian, you keep asking rob for "historical examples". kindly provide information from the CRA or "historical examples" about NOT changing status to married because your spouse is a non-resident.

my husband tried to claim me as a spouse but his accountant wouldn't do it without an SIN but to mitigate the whole 000 SIN thing just apply for an ITIN ( international tax ID number, which I found out about after the fact) as she is not eligible for a SIN so then you can claim her so you are 'on the level' and not worry and also get credit for your marriage. Now that I have my SIN I'm going to see if my husband can refile his from last year.

 

[BrianDell]

"you are misrepresenting your marital status"

Are my snowbird parents misrepresenting when they indicate on their return that they were residing in Alberta on December 31 while they were physically at their winter condo in Florida? They spend most of the year and have most of their ties in Canada. It's no coincidence that at the same time I decline to make fetish out of the metaphysical "truth", I decline to moralize and accuse those who enter a bogus SIN as fraudsters. Instead of getting on some high horse about it I simply point out that an invalid SIN combined with a claim to be married ROUTINELY gets flagged for CRA follow-up, unlike indicating single status, for which there is not a single report of someone getting audited for otherwise challenged by CRA for doing so when the spouse is non-resident. CRA furthermore indicates that if there were an impact on family income-linked credits, there would simply a recalculation creating a balance owing for benefits overpayment.

To rcohen, if you looked up those cases I mentioned where people on this forum said their accountant filed for them as single, they did not indicate that CRA had made any objection to them doing so. More to the point, however, is that I think the burden of evidence is on the party claiming something can't be done in this context than on the party who thinks it can be done. I see it as analogous to whether one can get away with not doing the medical upfront. I got a whole lot of finger wagging directed at me when I suggested that one can plan do the medical AFTER one has sent the package to Mississauga yet no one could point to even a single example of an application even being delayed as a result (of that decision alone) never mind having Mississauga send the whole thing back as incomplete. Meanwhile, there are reports of having to redo medicals because the first one expired practically daily.

"CRA doesn't always know if there's an advantage until after they have done an audit"

Rob, CRA doesn't generally go on blind fishing expeditions. It's typically when someone claims a credit and something associated with claim is unusual that they then decide to investigate. Like following advice on this forum to declare as married in their tax return, not realizing that their software auto-created a big credit on line 303 as the spousal income was assumed to be zero, entering a false SIN or no SIN, and then getting CRA on their case for claiming a credit which they would only be entitled to if the spousal income could be verified as zero (or at least less than $11 138), something that's particularly hard for CRA to do when CRA was told an invalid SIN or no SIN for the spouse in question.

Take a look at TaxCycle, which has a check box for the spouse being non-resident the entire tax year:
https://www.taxcycle.com/Support/Documentation/tabid/153/ID/1268/Non-resident-spouse.aspx
Note what the function of that check box is: if "yes" is checked that "ensures TaxCycle does not claim the amounts for the spouse for the GST credit and other provincial credits." Now what do you think tax software without this safety feature are doing? Quite possibly claiming credits the filer is not entitled to. I KNOW that I am not claiming "amounts for the spouse for the GST credit and other provincial credits" when I file as single.

"once the Canadian gets married to a non-resident the non-resident's world income is then used to determine the Canadian's family income, and what benefits they are now entitled to."

Go and read in detail what it says on the TaxCycle website I mentioned. Not that they are necessarily authoritative, but you seem to believe the software distributors are authoritative. I'd say "TaxCycle will calculate the total world income and the percentage of the world income that is from Canadian sources in order to determine whether to prorate the non-refundable tax credits" indicates that non-Canadian income is EXCLUDED from the calculation of benefits, particularly when clicking non-resident for the entire year "ensures TaxCycle does not claim [ANY] amounts for the spouse for the GST credit and other provincial credits."

I will also note that on the CRA website, the question "Do you have a spouse or common-law partner?" has as its answer "Generally, your spouse or common-law partner has to be a resident of Canada..." suggesting that residency matters, contrary to your apparent view here that "benefits" are linked to marital status regardless of residency. I'd further note that CRA asks to be advised if a spouse becomes non-resident, in order to "recalculate your credit", further suggesting that residency is relevant to determining "what benefits they are now entitled to."

The year the spouse has landed, it is of course a different story. When one files the spring of the following year, one will now have a SIN number, etc.

 

[Rob_TO]

Are my snowbird parents misrepresenting when they indicate on their return that they were residing in Alberta on December 31 while they were physically at their winter condo in Florida? They spend most of the year and have most of their ties in Canada.

No because there are very specific rules surrounding residency for tax purposes, and how you can be a deemed resident vs a non-resident in situations where you spent significant time abroad. Residency is not based at all on where you were on the last day of the year, so is completely irrelevant and has absolutely nothing to do with reporting your marriage to CRA.

unlike indicating single status, for which there is not a single report of someone getting audited for otherwise challenged by CRA for doing so when the spouse is non-resident. CRA furthermore indicates that if there were an impact on family income-linked credits, there would simply a recalculation creating a balance owing for benefits overpayment.

So is there some official site part of the public record that you are looking at that logs every audit done by CRA and what the reason was for that audit, or are you just going off a few people's anecdotal stories and then making it an absolute statement?

The reasons CRA audits people are not always based on some specific formula or event. It can be a number of factors (including seemingly random audits), one of which is having inaccurate info in your return. No I don't have any stats or anecdotal stories to show someone in particular has been audited specifically for this, I am just going by what friends in the industry have told me. I go by "better safe than sorry", so try to include only accurate facts in my returns.

Take a look at TaxCycle, which has a check box for the spouse being non-resident the entire tax year:
https://www.taxcycle.com/Support/Documentation/tabid/153/ID/1268/Non-resident-spouse.aspx
Note what the function of that check box is: if "yes" is checked that "ensures TaxCycle does not claim the amounts for the spouse for the GST credit and other provincial credits." Now what do you think tax software without this safety feature are doing? Quite possibly claiming credits the filer is not entitled to. I KNOW that I am not claiming "amounts for the spouse for the GST credit and other provincial credits" when I file as single.

ALL tax programs currently in use in Canada, must be approved, certified and be registered with the CRA in order to do netfiling. So if a tax program decides to do the 000 way for SIN (why they can't all make simple exceptions for this, I have no idea), and CRA still certificates them and accepts all of their returns, then CRA is basically saying it's ok to do. This has been done for decades for dependents/spouses with no SIN who are not doing their own tax return, without a peep from CRA about stopping the practice.

As for the tax program including a spousal credit the Canadian is not entitled to, well it's up to the person doing their taxes to ensure it was done correctly. If their non-resident spouse's income was in fact $0, then perhaps they are entitled to that credit. Of if they put in their world income at the actual amount, then the software would not include the credit.

Indicating marital status as married, and then determining what credits you are qualified for, are 2 different things.

Go and read in detail what it says on the TaxCycle website I mentioned. Not that they are necessarily authoritative, but you seem to believe the software distributors are authoritative. I'd say "TaxCycle will calculate the total world income and the percentage of the world income that is from Canadian sources in order to determine whether to prorate the non-refundable tax credits" indicates that non-Canadian income is EXCLUDED from the calculation of benefits, particularly when clicking non-resident for the entire year "ensures TaxCycle does not claim [ANY] amounts for the spouse for the GST credit and other provincial credits."

Should note they also tell to indicate your actual marital status.

As for the tax credits with non-resident spouse world income, I have seen firsthand someone that was receiving GST credit payments, got married to a non-resident and told their world income to CRA (which was very high), and immediately stopped receiving the payments based on recalculated family income. Perhaps they could have made a case to CRA here that world income shouldn't have counted? I'm really not sure as the rules are vague and don't give a clear answer.

Here is another article from an accounting group explaining that non-resident income is indeed used to calculate personal credits as spouses can actually be deemed residents for tax purposes even though they have never been to Canada: http://www.howlandtax.com/articles/nonresident-spouse.htm

I will also note that on the CRA website, the question "Do you have a spouse or common-law partner?" has as its answer "Generally, your spouse or common-law partner has to be a resident of Canada..."

There is no general statement like that on the CRA site. The only such statement is in regards to someone qualifying for their OWN CLAIM for credits or benefits and then transferring that payment to their spouse. The full text (not taken out of context) is:
GST/HST Credit - You can get the credit for your spouse or common-law partner (defined on the previous page). Generally, your spouse or common-law partner has to be a resident of Canada in the month before and at the beginning of the month inwhich we make a payment

Note from that same document also on GST/HST credit:
If your marital status changed after December 31, 20XX, you must tell us. Not, "it's your choice to tell us if you think it will impact your taxes".

suggesting that residency matters, contrary to your apparent view here that "benefits" are linked to marital status regardless of residency. I'd further note that CRA asks to be advised if a spouse becomes non-resident, in order to "recalculate your credit", further suggesting that residency is relevant to determining "what benefits they are now entitled to."

Yes and my main point here is that neither you nor I totally understand all the complex rules involved here. Even different accountants give different advice and info. That is why I will always suggest to be completely honest with CRA in filing your taxes. If you're married, tell them you're married, that your spouse does not live in Canada and doesn't have SIN, and let CRA determine the correct course of action to take and what credits or benefits you now qualify or don't qualify for.

What you are suggesting is to put an incorrect fact in the application by stating your marital status is single when in fact married, under an assumption that credits/benefits etc will not be affected.

You will not find a CRA source anywhere in existence that says it's ok to put your marital status an single when in fact you're married, nor do any questions asking about martial status make an exception for spouse's residency. Your reasoning that nobody has been caught that you know of, is very dangerous to follow IMO. Also it's dangerous to follow advice of an accountant that tells you to misrepresent basic info and go against what the CRA is clearly asking you for in martial status. Just because someone is a professional, doesn't always mean they know what will happen. Just look at the countless "professional" immigration lawyers out there giving horrible and wrong advice to people about the PR process, who then disappear when bad things happen as a result. The exact same could happen with an accountant.

I recommended 2 ways (using ITN or submitting final return by mail) which would allow one to have their accurate marital status AND not use 000 for SIN. Both are better solutions IMO than putting a flat our wrong fact on your return. Again this is just IMO, and what others in the industry have told me.

edit: I've also read several stories now of people calling in to CRA help centre, and being told to enter in 000 for SIN# for non-resident spouses. So this is coming directly from CRA.

 

[chris1302]

I have the same problem, my husband is a non-resident (applied inland, implied status).
I as well am confused as to whether or not to add him to my tax return.
He did not work in 2014 anywhere, if I do add him and put the SIN # 000.... can I then claim him as a dependent?

 

[Rob_TO]

I have the same problem, my husband is a non-resident (applied inland, implied status).
I as well am confused as to whether or not to add him to my tax return.
He did not work in 2014 anywhere, if I do add him and put the SIN # 000.... can I then claim him as a dependent?

Yes you can claim him under line 303 - Spouse Amount. With zero income you will get the maximum benefit.

 

[chris1302]

really, it does make sense since he is here, waiting for an OWP and of course unable to work. Hope cic starts processing these things a bit quicker.
Thanks

 

[BrianDell]

"No because there are very specific rules..."

My point here was that there are also specific rules governing other matters here, e..g. what constitutes "misrepresentation," such that you should be acknowledging those terminology wrinkles as well instead of, say, continuing to level the misrepresentation charge by using some common English or intuitive definition of misrepresentation.

"are you just going off a few people's anecdotal stories and then making it an absolute statement?"

I'm not the party saying "expect to be audited [or not]". That'd be you. My position is that there isn't any evidence filing as single increases the chance of an audit. There's always the possibility of a random audit, and that possibility is still there either way. And I'm not making any "absolute statements". In fact, that's the very thing I object to: your contention that I would be engaging in "misrepresentation" no ifs ands or buts about it, without even presenting an "anecdotal story" that supports that charge as a real likelihood.

As for what is "ok to do," I will note again that it is actually perfectly ok to defy CRA, never mind a software vendor, if one is on-side the relevant statutes, regulations, and case law. This is what tax lawyers do all the time, in fact. It's tax firm on behalf of a client versus CRA and then the tax court decides. Our obligation as Canadians is to the law, as opposed to CRA per se never mind some software vendor.

We already know that if one's spouse is the resident of another country that that spouse's income is usually not taxable in Canada by virtue of the tax agreements Canada has with most countries. These agreements have the force of the law. The China-Canada Income Tax Agreement includes the clause, "Items of income of a resident of a Contracting State [e.g. China], wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that Contracting State [e.g. China]." If CRA is going to penalize me (as opposed to failing to give me a credit) because my non-resident spouse's income isn't zero, I'd say CRA would be pushing the envelope since her income is not to be "taxed" by Canada. She moves from Canada to China and I lose any family income-related credits (we agree on that, right?), but I don't flip back to single? It's a double whammy whereby I've got none of the advantages of being married AND none of the advantages of being single? In my view, I'm either married for tax purposes or I'm single for tax purposes such that if you won't give me the one you have to give me the other. I'm not afraid of making that argument in tax court.

She doesn't have a SIN number as she's not tax resident in Canada and she doesn't need a ITN number because she has none of the income related connections to Canada that ITN requesters have. She's a non-resident including non-tax resident with no Canadian income and as a result she's tax irrelevant to Canada, meaning I'm effectively single as far as tax in concerned. That's the functional "truth" here.

As for taking things out of context, allow me to put back what you said I took out of context into the context I used it, which was to note that CRA appears to consider residency relevant to determining family benefits contrary to your apparent assertion otherwise. Which brings us to

"non-resident income is indeed used to calculate personal credits as spouses can actually be deemed residents for tax purposes even though they have never been to Canada"

Of course (a tax resident person's global income is relevant). But you didn't have the part from "as..." onwards before. Besides the fact Howland's remark "If you don't tell CRA about your marriage right away, you may find benefit payments will be temporarily suspended after filing your tax return, and you could be required to pay back benefit payments previously received" appears closer to my position on this issue than yours, I should add that I'm not saying a non-tax resident person's non-Canadian income is never relevant to a Canadian tax issue.

"If you're married, tell them you're married, that your spouse does not live in Canada and doesn't have SIN, and let CRA determine the correct course of action to take and what credits or benefits you now qualify or don't qualify for. "

Sure (although, again, CRA has been known to be on the wrong side of the law as evidenced by all the cases they've lost at tax court; if everyone just "let CIC determine the correct course" with respect to immigration nobody would be appealing CIC decisions would they?). In a letter, just like it says right on CRA's website "send a letter to your tax centre giving the CRA your new status and the date of the change" (an action I suggested in my first post in this thread) as opposed to trying to communicate subtleties through a software program that may not be designed for the purpose and quite likely is going to end up with people inadvertently claiming credits they shouldn't be. I'll add here that should I fail to send such a letter until the non-resident spouse lands, the result that may be expected is CRA possibly re-calculating any family income-linked credits that applied to me between the marriage date and the landing. Given the gap between the basis for assessment of, say, one's GST credits (my 2013 income determines my credits from July 2014 to June 2015, for example) unless they switch the basis there's yet more reason to doubt that any such re-calculation would change much.

 

[Rob_TO]

"No because there are very specific rules..."

My point here was that there are also specific rules governing other matters here, e..g. what constitutes "misrepresentation," such that you should be acknowledging those terminology wrinkles as well instead of, say, continuing to level the misrepresentation charge by using some common English or intuitive definition of misrepresentation.

It is misrepresentation in that is it a simple material fact question they are asking (are you married or not, yes or no), that you are not answering accurately. Again there is NO wording anywhere in CRA site or on the tax forms that clarifies this question to mean are you marrying a resident or not. And there is NO wording anywhere that states it's ok to answer no to this question if you've married a non-resident.

While this will most likely not lead to charges of fraud or misrepresentation in a court in terms of attempting to defraud the government, it is basic misrepresentation in that it is not an accurate response to the simple question asked.

Similarly with CIC the same rule applies. If you do not answer a question correctly, that could be seen as misrepresentation whether or not it was done deliberately to commit fraud. It's just semantics though, but imagine if everyone for taxes, immigration or any other issue, took the stance of "this question isn't very important to the end result in my own opinion, so I'll just answer it wrong".

I'm not the party saying "expect to be audited [or not]". That'd be you.

I'm not saying expect to be. I'm saying that based on what i've heard from someone who works at CRA, and direct from an accountant, it's these kind of material inaccuracies that could flag a return for audit. Take that secondhand info for what it's worth to you. Meanwhile you are recommending to NOT answer a question honestly based on your or others interpretation of the rules, and on the basis you haven't personally seen anyone face any real consequences for it (despite CRA not making their audit cases public knowledge)... all a very dangerous way to proceed in general.

Even if that extra chance is a fraction of a percent, personally I choose to submit everything on my tax return completely accurate upfront so I will have as little interaction with CRA as possible.

she's tax irrelevant to Canada, meaning I'm effectively single as far as tax in concerned. That's the functional "truth" here....

I should add that I'm not saying a non-tax resident person's non-Canadian income is never relevant to a Canadian tax issue.

You are contradicting yourself. How can something be "truth" yet then you say it may not be?
And that is the basis of my logic here, as neither you nor I are accountants or work for the CRA so neither of us know for certain. You are using words like "usually", "in my view", etc to give your own interpretation of the rules, and then using that to justify presenting incorrect information on a tax return, which is not supported by any CRA documentation, nor I doubt would be recommended to you if you called CRA help centre to ask, unlike submitting 000s as your spouse's SIN which CRA gladly tells you is fine to do if you call and ask them directly.

This is a difference of opinion with neither side able to prove anything, so there isn't much more to say. However I'll keep recommending people to do their returns as honest as possible by answering basic material fact questions accurately, and calling to ask CRA if there are any doubts.

 

[stircrazy]

It's not considered tax fraud if you don't claim as married on your taxes. I called Revenue Canada right after marrying in 2012 and they told me that because my husband is a non-resident then there is no point in claiming married until he actually gets a PR. While Rev Can is aware that I'm in fact married, I was told by them to claim single.

 

[sohaib1]

ok so I got married on Dec 27/2014. She doesn't work and she has never worked in her whole life. I put her income as zero, but it gave me a 1500 extra reimbrument is that normal?

 

[Rob_TO]

It's not considered tax fraud if you don't claim as married on your taxes. I called Revenue Canada right after marrying in 2012 and they told me that because my husband is a non-resident then there is no point in claiming married until he actually gets a PR. While Rev Can is aware that I'm in fact married, I was told by them to claim single.

Note there is a difference between updating your marital status, and actually claiming someone as a line item on your tax return. You can update your marital status yet not claim anything to do with your spouse on your taxes.

I did correct myself earlier that "fraud" was too strong of a word in cases that there is no intent to actually deceive CRA for your own gains (which people do try to do in claiming singe vs married or common-law). It's simply putting in an incorrect fact to a basic question. However if CRA said that specifically you are not required to update marital status to them after you get married in some cases, then most likely it's ok. But I still stress that whether or not someone is a deemed resident of Canada, or if world income from a spouse not physically living in Canada will affect a Canadian's tax return... is not an easy thing to determine all the time as there are many factors involved beyond where in the world the person happens to be living, and can be at the discretion of CRA. A spouse can definitely have a big impact to a Canadian's taxes before they get PR or a SIN. So one needs to be very careful in proceeding this way under the assumption their spouse will have zero effect to their taxes, since if it turns out there would have been some impact there may be some consequences at a later date when the marital status is updated.
IMO it's still much safer to simply indicate marital status when it changes regardless if a non-resident or not, so there are no surprises later or claims from CRA that you should have changed your status earlier.

 

[Rob_TO]

ok so I got married on Dec 27/2014. She doesn't work and she has never worked in her whole life. I put her income as zero, but it gave me a 1500 extra reimbrument is that normal?

If she is living with you and made zero income then yes, you can claim her in 2014 for max amount under spouse amount (even if she doesn't have SIN or PR) and that would give you an extra 1500-2000 on your return. That's normal.

If she is not living with you then you would need to prove she is dependent on you financially (so would need records of money transfers, etc) in order to claim her.

 

[sohaib1]

If she is living with you and made zero income then yes, you can claim her in 2014 for max amount under spouse amount (even if she doesn't have SIN or PR) and that would give you an extra 1500-2000 on your return. That's normal.

If she is not living with you then you would need to prove she is dependent on you financially (so would need records of money transfers, etc) in order to claim her.

She is not living with me, she is in Pakistan. I did send her money from January 2014 to up until now. So is that OK. She lives with her parents as well