# Separating assets between spouses - am going to get into trouble?



## metta2006 (May 1, 2011)

Hi,

I'm a stay home mom and I have been depositing money from my husband's paycheque in my savings account for years and I reported that income in my tax return.I recently found out that I was not supposed to do this except for spoual RRSP and TFSA. Now I want to contribute to spoual RRSP but the money will come from my savings account instead of his. Will that be a problem if cRA audits our tax and finds out that every month money was trasnferred from our paycheque account to my savings account? What should I do? Should I confess it to CRA then it will be less penalty? I know what to do next time. I wil set up monthly contribution from my husband's paycheque to my spousal RRSP an kids RESP but what should I do about the past faults? Thanks so much for your help!


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## stardancer (Apr 26, 2009)

I assume you are talking about a spousal RSP in which he is the contributor and takes the contribution deduction and you are the annuitant. If so, CRA won't really care about where the money came from; all they would care about is 'does he have the proper receipt or not'

If you are talking about your own RSP, you must have the contribution room in order to contribute. The same thing if you are talking about a spousal RSP in which you are the contributor and take the contribution room and he is the annuitant (although I can't see why you would do that as a stay at home mom)


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## kcowan (Jul 1, 2010)

It sounds like you should claim the interest from the account on your tax return. And it should be a taxable account!


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## MoneyGal (Apr 24, 2009)

There are a couple of questions in the original post. Interest income earned on the husband's earnings should be reported by the husband on his tax return. The amounts are probably very small but if you want to "correct the faults of the past" you can file T1ADJ forms with CRA for both your and your husband's returns for the years in question. 

For the spousal RRSP question, what StarDancer said.


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## PuckiTwo (Oct 26, 2011)

metta2006 said:


> ...... I have been depositing money from my husband's paycheque in my savings account for years and I reported that income in my tax return.I recently found out that I was not supposed to do this except for spoual RRSP and TFSA. .......





MoneyGal said:


> There are a couple of questions in the original post. Interest income earned on the husband's earnings should be reported by the husband on his tax return.


I am very interested in this topic, especially in Moneygal's quote and would like to ask the CMF tax experts for more insight.

1. Am I assuming correctly that if the OP deposited the husband's pay cheque into her own savings account the husband paid already income tax on his earned salary (usually, if someone receives a "pay cheque" the gross earnings are being reduced by applicable income tax and other deductions before printing a cheque.
Further assuming

a) this net amount largely is the household income (household = husband + wife)
b) after paying for household expenses the wife takes her half and the husband takes his half. Both invest and ern interest/dividends

2. Woudn't both have to report income on their portion of the investment income or would the husband as the main household earner (in this case) have to claim both incomes, hers and his own?

3. And how does this work if both have their separate accounts of if the couple has a joint account?

4. If the husband must pay tax on the full investment income (maybe I misunderstood Moneygal?) does this mean you can never give money to a spouse or child? If they then invest it must the person who gave the money pay the tax on the income?


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## CanadianCapitalist (Mar 31, 2009)

2. No. In your example, since the husband is the sole income earner, the interest should be reported in the husband's tax return.

3. Works exactly the same way.

4. You can avoid attribution rules by loaning money to the lower-income spouse and charging the prescribed interest rate, which currently is just 1%.

Reference: Interspousal and Certain Other Transfers and Loans of Property


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## MoneyGal (Apr 24, 2009)

PuckiTwo said:


> does this mean you can never give money to a spouse or child? If they then invest it must the person who gave the money pay the tax on the income?


It depends on how the money that is given to the spouse/child is used by the spouse/child. There are lots of situations which do NOT give rise to attribution but the situation outlined in the original post most definitely does. This isn't tax on earnings, it is tax on interest and the interest earned has never been subjected to tax.


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## PuckiTwo (Oct 26, 2011)

*CC and Moneygal:* thks very much for yr clarifying and eye-opening information which will help to check our own situation with our accountant. However, what an archaic act in regards to family income.


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## metta2006 (May 1, 2011)

Are you sure about CRA not caring about the source of the contribution? Can I contribute money in my savings account to my spousal RRSP? I want to contribute maximum limit right away to get it tax sheltered. If I must use my husband's money, then I will have to wait for every paycheque monthly to contribute. 



stardancer said:


> CRA won't really care about where the money came from; all they would care about is 'does he have the proper receipt or not'


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## stardancer (Apr 26, 2009)

The attribution rules are built into the spousal RSP with the 3-year rule, so even if you use your own money for an RSP in which your husband is the contributor, only withdrawals within the 3 year limit will be taxed to him.


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## MoneyGal (Apr 24, 2009)

it isn't really "her" money in any case, it is his earnings deposited into her bank account.


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## metta2006 (May 1, 2011)

Actually most of the money in my account is mine as I got gift money from my mom. My mistake was not to separate exactly my portion from his. So I assume that it's okay to fund my spousal rrsp from my account?


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## MoneyGal (Apr 24, 2009)

Well, technically contributions into the spousal account your husband established for you (if I've followed your situation correctly) must be made by him, because they are based on his contribution room (not yours), which arises from his earned income (not gift money from your mom). Because you have also been depositing his paycheque into your account, you could make the (successful) argument that this is "his" money. HOWEVER, you have also claimed that it is "your" money for CRA purposes, because you've claimed the interest income that has arisen on the account. 

CRA is unlikely to pursue any of this, assuming he has the contribution room and you can show the paycheques going into your account. Nonetheless, you should probably (1) stop claiming the interest income arising on funds originating from your husband, and (2) make future contributions to the spousal account established for you by your husband from his accounts without having the funds pass through another account in the interim.


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