Is It Illegal Not to Claim Common-Law Status on Your Taxes?

Plenty of couples live together, split the bills and still file as single because they never married. The tax rules, however, are not based on a wedding certificate. They are based on how you actually live.

This article explains when CRA treats you as common-law, what can happen if your return does not match your situation, and what to do if you think you have been filing incorrectly.

When CRA treats you as common-law

Under the Income Tax Act, a common-law partner is a person who cohabits with the taxpayer in a conjugal relationship and has done so throughout the 12-month period ending at that time, or who is the parent of a child of whom the taxpayer is a parent.

CRA describes living common-law as living in a conjugal relationship with someone who is not your married spouse, plus at least one of three things: 12 continuous months together, being the parent of your child, or having custody and control of your child who depends on them for support.

This is a tax definition. It is different from the three years used for Family Law Act support claims, so being common-law for CRA does not by itself decide a family law question.

Is filing as single illegal?

If you meet CRA's definition of living common-law, you are in a common-law relationship for CRA purposes, whatever you have called yourselves. Whether your return matches your situation depends on your facts, so it is worth confirming with an accountant or lawyer.

Whether an inaccurate return leads to a penalty depends on the circumstances. Under section 163(2) of the Income Tax Act, a false statement or omission in a return made knowingly or with gross negligence attracts a penalty. CRA's audit manual describes the amount as the greater of $100 and 50% of the additional tax attributable to it. An honest mistake about when the 12 months began is a different situation from deliberately hiding a partner, but a tax professional or lawyer can assess where your facts fall.

What can happen to benefits and refunds

For couples, benefits and credits are generally based on family net income. When your marital status changes, CRA recalculates them on adjusted family net income, starting the month after the change. If CRA finds an overpayment, it sends a notice with a remittance voucher.

CRA may keep all or part of future Canada Child Benefit payments, income tax refunds or CGEB until an overpayment is repaid.

Separations, reporting deadlines and children

Once you cohabit in a conjugal relationship, you are deemed to keep cohabiting unless you live separate and apart for at least 90 days because of a breakdown of the relationship. A separation of less than 90 days caused by a breakdown does not interrupt the 12-month period.

A change in marital status must be reported by the end of the month after the change. A separation should not be reported until it has lasted at least 90 days, and the effective separation date is the day the couple started living apart. If you are still separated after filing and have been for 90 days or more, CRA says to change your status to separated using the first day of separation, and you may need to file an amended return. Involuntary separations, such as for work, school, health or incarceration, do not count as a breakdown.

Children add another layer. For the Canada Child Benefit, a child living with you 40% to 60% of the time is treated as shared custody, and each parent generally gets 50% of the amount. If the child lives with you less than 40% of the time, you are not eligible for child and family benefits for that child. Each parent must immediately tell CRA of a new custody situation.

What to do next

• Work out the date you started living together in a conjugal relationship, and whether you had a child together.
• Compare that date to CRA's 12-month and child-based tests.
• Look back at the marital status on recent returns and on any benefit applications.
• If you think your status was wrong, speak to an accountant or lawyer about how to correct it.
• If you receive a notice of overpayment, read it carefully and note the repayment instructions.
• Keep records of move-in dates, leases and any separation dates in case they are questioned.

Because penalties and repayments depend on the facts, an accountant or lawyer can help you decide how to correct past returns.

Frequently asked questions