First Time Filing Taxes Together as Common Law – Where Did the Refund Go?
My partner and I are filing together for 2016 as a couple for the first time and have discovered a couple of things that we are unsure of.
I made about $89,000 in 2016 and she made about $46,000.
My RRSP Contribution – $12,230, Her RRSP contribution - $12,300
She has a child that she was claiming as a dependent and now this claim has transferred to me during our tax preparation using tax software. Note that when we claimed our common law status, she lost all of the child benefits she was receiving and had to pay some of what she received back.
Question: Is this because I am the higher earner? I suspect so.
As a result, almost all of her expected refund from her RRSP contribution, $2989 has been reduced to about $129 because of us filing together. Most of my expected refund is still in tact; $2205.
Question: What happened to her RRSP contribution refund?
Some benefits such as the CCTB are based on family income, i.e. it is no longer just her income that is used to calculate child benefits.
Since the tax software also transferred the child deduction to you (makes sense since you are in a higher tax bracket) , she has lost that tax deduction. It stands to reason that she would have had to pay additional taxes then, and it is only because of her RRSP contribution that she still is getting a refund.
Welcome to the world of living common law or marriage.
Thanks for the reply. However, if I apply the logic above, her company would have to have not been taking near enough taxes off her pay. Sorry that a naive to this. It just seems that there is a mistake made somewhere on our returns.
Originally Posted by AltaRed
No experience in how the child benefits works or how tax software decide which return is best to claim what on.
At the same time, it looks odd to me that on an $89K income that presumably is from employment that has withholding taxes taken off of it *and* a full $12,230 RRSP contribution deducted against it would only have a $2205 refund.
Correct me if I'm wrong ... but that would mean the withholding taxes were something like $10K short of what the correct number was.
Maybe the full RRSP contribution is reported but only a small amount is being deducted?
One can report it but choose to not claim the deduction until a different tax year.
Or maybe the income is made up of a smaller amount of employment income that has withholding tax applied to it with a large chunk from a source that does not have withholding taxes?
Dividends would be an example.
Then too, if the higher income earner is getting the child benefits (with whatever adjustments the combined higher income makes) - shouldn't the higher income earner's refund be larger than "mostly intact"?
We don't have nearly enough details to go beyond the speculation we have already done. But for sure, the female's refund will be reduced since she no longer has the child deduction (her employment withholding likely still assumes she has a dependent).
And yes, I did not do any 'back of envelope' math to also agree that a refund of $2205 is woefully short on a $12,230 RRSP contribution (and deduction). Something else is at play.
Thanks for the replies so far.
Regarding my RRSP contribution; about 8800 of it is from a small pension contribution from my company and majority deducted from my pay pre-tax.
That sentence is very confusing. What is the amount showing on line 208 of your return? $12,230?
Originally Posted by Congo
Line 207 - RPP - $8430
Originally Posted by RussT
Line 208 - RRSP - $3800
Your withholding looks spot on then; they would account for your RPP contributions when withholding.
Your common-law partner's withholding would likely be correct if she filled out that she had an eligible dependent on her payroll form.
The amount for children that your common-law partner transfers to you will have an impact, yes, but the larger impact would be losing the tax credit for eligible dependent equivalent to spouse. If she was single, she'd be able to claim this amount for her child; it's the same as the personal exemption (like claiming a spouse with no income). In Ontario for example, this would account for over $2K difference in taxes.
I'm not as up on the Canadian Child Tax Credits but they're based on Family Net Income (which now includes your income), hence losing that and having to repay some.
It would be interesting if you ran both returns separately and then ran them together to see how each fair individually and together.