Getting audited by CRA
Question: My fiance received a letter from CRA. We have a child together who is now 3 years old. By definition we are common law but we’ve been filing our taxes as “single”. I’ve been told that there’s a good percentage of people that do this. One of the proofs that CRA is asking for is proof that I do not live with her. Any government related mail are addressed to my folks and even my T4 and pay stub go to my folks address.
Issue is my credit card bill and cable bill are addressed to where we reside now. We decided that come 2009 tax season is the time to claim as common law. If we can’t provide sufficient documentation, whats our worse case scenario?
Answer: The worse case scenario is that they charge you with fraud, although that is highly unlikely. More commonly they will re-assess both you and her as though you had filed as common-law, which may mean you and her will be required to repay some or all of the child tax credits you have received, and you may also owe more in income tax.
Since you are common-law, you are correct, you should file as common-law to prevent these types of problems from occurring in the future.