Every spring brings warmer weather and new life, but it also brings something else Ė tax time. Doing your taxes is a hassle and it can be very confusing to keep up with the changing regulations. But one thing you can do before you file to make your taxes a little less complicated is to talk to your partner about your relationship status ahead of time. There are many different ways to file and some might give you a higher refund than others, so take the time to do whatís best! What is a Common Law?
In Canada, a couple reaches common law marital status once they have lived together for twelve consecutive months. If the couple has a child together, they are considered common law as soon as they move in. In the United States, things are a little different. Regulations vary from one state to another and, while cohabitation is a factor, in most cases the couple must agree that they identify as a married couple. In the United States, couples have the option to choose whether or not to file as common law, but that is not the case in Canada. If you meet the guidelines, you are required to inform the Canadian Revenue Association of your relationship status using an RC65 Marital Status Change form. Unfortunately, there are some tax credits in Canada that couples are no longer eligible for once they reach common-law status. Can You Save Money by Filing Jointly?
Many couples want to know if they can save money by filing their taxes a certain way. In the United States, couples have the option to file separately or jointly. When it comes to your deductions, there are a variety of factors to consider such as the number of dependents you have or whether both of you are working. For some U.S. couples, filing jointly will deliver a larger refund, though for some it may not. In Canada, taxes are always filed on an individual basis, regardless of marital status. A couple can come together to take advantage of tax credits, but they must each file their own return. When filing as a common-law couple, you must also remember that you donít pay taxes on your combined income. Couples (both common-law and married) can combine their receipts for medical expenses, charitable donations, and the like but one personís tax balance due canít be taken out of the other personís refund, unfortunately.
Filing taxes can be tricky, especially if you and your partner arenít completely agreed on your relationship status. If you live in Canada, you may not be able to choose how you file but, if you live in the United States, it might be worth talking to a CPA before you file to determine which option will give you the biggest refund. A CPA will also know about all of the tax credits and deductions you may qualify for to maximize your refund.
~ Glen Community Support