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Your federal tax filing status changes with divorce

Many British Columbia residents are expected to take advantage of federal benefits and credits while filing returns, due by the last day of this month. Refunds can be affected greatly by changes in household income, particularly for low-income taxpayers. Separation and divorce alter that income and impact how tax returns are filed with the Canada Revenue Agency.

The Canada Child Tax Benefit and the GST/HST credit - a refund for the Goods and Services Tax or Harmonized Sales Tax - are among the credits vital to many families. The status of a live-in or marital relationship plays heavily into whether you qualify for credits. The CRA must be notified when household income is gained or lost through cohabitation, marriage, separation and divorce.

The CRA can penalize taxpayers who fail to file taxes correctly by mistake or, in some cases, who try to claim undeserved credits by hiding a relationship status. At the same time, spouses going through a separation or divorce can lose tax credits they are qualified to receive by not reporting a loss of household income.

Tax credit changes aren't the only complications for British Columbia spouses who decide to part ways. Separation and divorce frequently bring up other legal issues with tax implications -- child support and alimony. Payers and recipients of divorce-related support must understand the tax obligations that go with them.

There is no federal tax deduction for parents who pay child support, but spousal support payments are deductible. For recipients, child support is not considered income but spousal support is taxable. Documentation must support the tax claims you make about any form of support.

It can be difficult to figure out what you can and can't claim during a stressful separation or divorce. Attorneys and tax advisers can help you with this financial transition, so you remain on track with accurate CRA filings and avoid federal penalties.

Source: The Canadian Press, "Tax season: How marital status impacts your tax return," Alexandra Posadzki, April 16, 2015

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