Tax experts

[Savage Bacon]

Long post, need advice.

I always did my own taxes. On turbo tax. Super easy and seems to be thorough. No business, just personal. Single parent with one child, it was super easy and never had an issue.

So I got shacked up with an amazing girl and we had a child in 2018. Did our taxes separately, but as common-law. I claimed my daughter, mom claimed our boy. Everything seemed OK.

In 2020, we did our 2019 taxes and mom owed a lot of money. CRA had tried contacting her through her old address, which had been updated to our new address already, asking for birth credentials. We never got the messages so they assumed we claimed a "pretend" kid. On top of this, my daughter, who is mine only, single dad for 12 or so years now, default to mom's taxes, not mine. So now she owed overpaid child tax too.

So any guy with a kid, that is common-law with a girl. For tax purposes, his kid defaults to being her kid?

Now we're doing our 2020 taxes and we're lost. Can mom claim our boy, and I claim my daughter? But mom claims child tax on both kids? Does mom 100% claim both kids and I claim no kids? Should we do our taxes together? Or is it better to do them separately?

I used to actually get a little chunk of money back every year which was nice as I pay a small fortune in taxes. But I'm ready to give that all up to make this mess around go away. I make more than mom does if that makes a difference. Our boy is in a day home. That is our only expense we would claim.

Sorry for long post. And being ignorant to tax rules. We don't know this system at all. It used to be easy!!!

[Dean2]

Far too complicated a set of questions to answer on this forum. This will give you a real good start and there are lots more links to info on the same site. It is explained in pretty simple terms. If you can't follow this easily it would be worth paying a couple of hundred bucks and getting a good accountant to go over this and do your return for this year. The general rule, with some exceptions as always, is that the lower income person claims child care etc expenses. If you decide to go with an accountant, pm me and I can give you a couple of names.



https://www.canada.ca/en/revenue-age...s-credits.html

[Savage Bacon]

Thanks Dean. Pm sent

[bobtodrick]

What Dean said.
When we divorced we had 50/50 custody of our two children. It says right on the CRA website that we could each claim one child ( which we did ) or alternate years claiming both.
CRA decided arbitrarily that their own stated rules didn’t apply. Countless letters and phone calls solved nothing, until thankfully a friend that is a tax lawyer called and got it dealt with.
I truly think that to some degree CRA just does these things hoping the average person isn’t going to spend the time/money to fight it.

[Savage Bacon]

Originally Posted by bobtodrick

What Dean said.
When we divorced we had 50/50 custody of our two children. It says right on the CRA website that we could each claim one child ( which we did ) or alternate years claiming both.
CRA decided arbitrarily that their own stated rules didn’t apply. Countless letters and phone calls solved nothing, until thankfully a friend that is a tax lawyer called and got it dealt with.
I truly think that to some degree CRA just does these things hoping the average person isn’t going to spend the time/money to fight it.

You need to know the system inside and out. Which most people I assume don't. I never had any issues until I added family members. And getting ahold of CRA this time of year with questions is impossible.

[Savage Bacon]

I had a good chat and got some info and steered in a direction to head.

Thanks Dean.

I will update in a couple of days with our progress. Thank God this only happens once a year.

[pikergolf]

Some people in the CRA are absolute bullies. Probably Canada's worst dept.

[MoFugger21]

Originally Posted by Savage Bacon

Long post, need advice.

I always did my own taxes. On turbo tax. Super easy and seems to be thorough. No business, just personal. Single parent with one child, it was super easy and never had an issue.

So I got shacked up with an amazing girl and we had a child in 2018. Did our taxes separately, but as common-law. I claimed my daughter, mom claimed our boy. Everything seemed OK.

In 2020, we did our 2019 taxes and mom owed a lot of money. CRA had tried contacting her through her old address, which had been updated to our new address already, asking for birth credentials. We never got the messages so they assumed we claimed a "pretend" kid. On top of this, my daughter, who is mine only, single dad for 12 or so years now, default to mom's taxes, not mine. So now she owed overpaid child tax too.

So any guy with a kid, that is common-law with a girl. For tax purposes, his kid defaults to being her kid?

Now we're doing our 2020 taxes and we're lost. Can mom claim our boy, and I claim my daughter? But mom claims child tax on both kids? Does mom 100% claim both kids and I claim no kids? Should we do our taxes together? Or is it better to do them separately?

I used to actually get a little chunk of money back every year which was nice as I pay a small fortune in taxes. But I'm ready to give that all up to make this mess around go away. I make more than mom does if that makes a difference. Our boy is in a day home. That is our only expense we would claim.

Sorry for long post. And being ignorant to tax rules. We don't know this system at all. It used to be easy!!!

There is no "claiming" children unless you are a single parent, then you're able to claim an additional tax credit for an eligible dependent (additional $13k tax credit less any income the child earned). If used to be that you recieved an additional tax credit for all children, but the child benefits were taxable amounts (UCCB). The child benefits now are non-taxable (CCB) but there is no tax credit for the children (unless you are a single parent, as mentioned above).

If you are common-law, the children are not eligible dependents and the lower income spouse must claim any childcare expenses (unless the lower income spouse was attending post-secondary schooling or are disabled).

Hope this helps, if not, pm me.

[Big Grey Wolf]

Guys just small clarification. When is a item capital and needs to be depreciated? A few years back it was if cost more than $500, has that changed?
Had someone say traps at $20 each had to be depreciated as capital item.

[EZM]

Originally Posted by Big Grey Wolf

Guys just small clarification. When is a item capital and needs to be depreciated? A few years back it was if cost more than $500, has that changed?
Had someone say traps at $20 each had to be depreciated as capital item.

here's the 101 ...

Capital assets are those items purchased by a business like equipment or machinery, where you pay X dollars and "depreciate" it over a period of X years - so example ….

You buy a $10,000 piece of equipment and depreciate it $2000/yr for 5 years - your asset depreciates in value (going down by $2000 each year) but you gain a tax benefit in depreciation of $2000 in each of those years (simplistically - not exactly - but kind of like essentially lowering your income) so you pay less in assessed taxes.

In many cases depreciation works to your benefit, in some other cases it better to expense the items and gain the tax benefit one time (and right away) - but really depends on what it is.

Expenses don't allow you to build "assets" so, therefore, as a side effect, are not valued as assets, therefore do not benefit you if your credit facility depends on assets as leverage or collateral (or revolving credit) which may be essential for many small businesses where cash flow and/or a loan is needed. Sometimes this means, No capital equipment = No collateral = no loan (nothing for the banks to repo if you default).

There is rules around all of this, so consult your accountant - but generally speaking, they are 2 options for you in many cases.

[Rdamours]

You could double check with Mather Tax law in Edmonton and they can give you some advice over the phone. The lawyer and his wife used to work for the CRA and the finance minister.

Check out the website and email him and he will call you back and let you know how to proceed.

[Dean2]

The definition of capital assets is pretty clear and the depreciation rates on each class is right in the bulletins. You do not have the option to expense whatever you want. For example, vehicles must be depreciated, operating costs are expensed. The one major exception area is computer software and hardware where u have more options. The 500 cutoff line for tools etc is generally still in place. Below expense, above depreciate.

Link to the classes.

https://www.canada.ca/en/revenue-age...-property.html

[fallen1817]

Originally Posted by pikergolf

Some people in the CRA are absolute bullies. Probably Canada's worst dept.

Second only to the PM's office haha

[Savage Bacon]

Ok so our taxes are done!! We came out a little bit ahead. All info is entered. We did our taxes together. It kept our claims completely separate, and devided our info accordingly.

One thing I learned is not to let mama do the taxes. Jeez I think that's where all our problems started.

Last year we each did our own taxes. We kept having to look up each other's info. We will never do that again.

Thanks for everyone's input. And good luck to all of you that are in the same boat I was.

[Big Grey Wolf]

Dean/EZM, thanks guys for clarification on capital items.