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Thread: Question on income tax: INCOME SPLITTING

  1. #1
    Smart Canuck Purdee's Avatar
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    Hi everyone,
    I need advice on income splitting. I've been googling and I'm still confused. We are a family of 3: mom, dad (both under 65) and 3 years old child. I made the most money and I'd like to know if I can transfer some of my earned income from my employer to my husband and child. If so how much can I transfer? I assume it's the difference between what he made and the federal amount of $47,630?

    I logged into my CRA account and I could not find the RC62 slip for UCCB?

    Thank you
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    Last edited by Purdee; Sun, Mar 10th, 2019 at 06:28 PM.


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    Quote Originally Posted by Purdee View Post
    Hi everyone,
    I need advice on income splitting. I've been googling and I'm still confused. We are a family of 3: mom, dad (both under 65) and 3 years old child. I made the most money and I'd like to know if I can transfer some of my earned income from my employer to my husband and child. If so how much can I transfer? I assume it's the difference between what he made and the federal amount of $47,630?

    Another question on UCCB. I logged into my CRA account and I could not find the RC62 slip.

    Thank you
    Didn't the Canada Child Benefit i.e CCB replace both the UCCB and
    CCTB, that might be the reason for NO - RC62 slip. I could be wrong just guessing.

    See link below.

    https://turbotax.community.intuit.ca...p-what-do-i-do
    Last edited by tjthemanto; Sun, Mar 10th, 2019 at 05:39 PM.
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    https://turbotax.community.intuit.ca...-do-i-claim-it

    Question :

    The universal child care benefit rc62 slip does not exist anymore. do i claim it?

    ANSWER:

    The new Canada Child Benefit is tax-free which means there's no slip and no need to enter it on your return. The RC62 section in the 2017 version is only for people who received the UCCB late or had to repay certain amounts.
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  4. #4
    Smart Canuck Purdee's Avatar
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    yes you are correct. Thank you for confirming

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    The RRSP deadline for contribution for 2018 was March 1, 2019.

    Since the first 60 days of the current year also you can contribute to the last year 's RRSP and not just up to December 31, 2018, the financial institutions are very late in uploading the respective RRSP contribution to CRA - My Account.

    Also TFSA the banks and financial institutions take their own time to report your contribution and withdrawal to CRA. So do not trust the info on CRA yet, it might not be current and up to date. It is best to keep your own record during the year for any contribution or withdrawal you make to RRSP or TFSA.

    Even CRA has a footnote saying that we are not liable for the TFSA info you see here, and any penalties for over contribution are your problem not ours.

    Until you totally file your taxes and get a Notice of Assessment in your hand, you can't really trust how accurate and current the RRSP and TFSA info is on CRA - My Account.

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    I think there is only pension income splitting for people 65 + in Canada.

    The other regular non pension income splitting for people below 65 was where people were using corporations and shares and dividends etc for income splitting.

    I am not sure if income splitting exists for regular salaried income people below 65.

    Looks like only pension income splitting for above 65.

    And business income, corporations income etc for people below 65.

    Are you both regular salaried people? Income splitting might not exist for you.

    Or you have some business then maybe some complicated tax loopholes exist for income splitting.

    Double check with an accountant or tax friend of yours. Actually CRA reps are also very helpful if you call them and ask. Or some CA on this forum might know.
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    Smart Canuck Purdee's Avatar
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    thank you, after more digging, like you said income splitting is only available for those over 65 and those under 65 with business. We are just regular salaried income people
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    Quote Originally Posted by Purdee View Post
    thank you, after more digging, like you said income splitting is only available for those over 65 and those under 65 with business. We are just regular salaried income people
    Yeah looks like it.

    Anyway all the free tax software like StudioTax, some versions of TurboTax and Ufile etc will automatically split the income for you in case there is a remote possibility that such income splitting exits for regular salaried people below 65. They will automatically maximize or optmize the return and refund for you.

    So don't worry even if you make a mistake they will correct it for you especially a huge thing like income splitting which is worth thousands of dollars.

    I know a senior couple who used the FREE TurboTax the various spousal amounts etc were automatically transferred to lower taxes and maximizing the return. They kept on getting an error message and had to manually over ride if they did not do what the software was telling them

    Are you sure you don't want to claim this? Are you sure you don't want to take advantage of this? The software kept on telling them!

  9. #9
    tightwad and proud of it! brunt's Avatar
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    I just saw this thread, so I apologize for the late reply.

    Disclaimer - I am not an accountant, and advice from the web should always be viewed skeptically. Please feel free to read, but discuss with a qualified professional before you try any of these.

    There are only three ways to income split relatively easily:

    1) Start a company, and have your lower income relatives work for you (and you must show that they actually do work, and that their pay is fair for work done). This taxes the income in their hands. Only useful if your primary income is through your company.

    2) Start a corporation, and have your lower income relatives hold more shares than you do. Profits can be paid out in the form of dividends, and only the number of shares that you own are a consideration. Only useful if your primary income is through the corporation. This is the most complicated solution.

    3) Contribute to a spousal RRSP. The higher income individual makes a spousal contribution to the lower income spouse. The higher income spouse gets the deduction at contribution time, and the lower income spouse claims the income upon withdrawal. A big "gotcha" here is that the money has to stay in for three years, or the income will be counted back to the higher income contributor. For more information: https://www.taxtips.ca/rrsp/spousal-rrsp-rrif.htm. This sounds complicated, but it is usually the easiest one.

    Not much else that is possible legally. The US is actually better for this - you can elect to do a joint return with your spouse, which very easily does the same thing. It is outrageous that one couple where Spouse A makes $160,000 and Spouse B $0 pays significantly more tax than the couple where Spouses C and D both make $80,000.
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    @brunt thank you for your post, i do appreciate your advice, unfortunately the first 2 options are not applicable to us and the 3rd is possible but not doable at this time, we don't make a lot of monies in addition my husband is a US citizen and a Canadian permanent resident so he already has to do taxes for both countries.
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    tightwad and proud of it! brunt's Avatar
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    There is one more option, now that I think about it:

    4) Investments can be made in the lower income spouse's name. However you have to be really careful here. The lower income spouse must have had a sufficient income to put into the investment (just putting their name on it is not sufficient, you have to be able to show that it was also purchased with their money). So investing from a joint account will likely not be acceptable - establish an account in the name of the lower income person's name and deposit their pay in it, and fund the investments from this account. Probably best to get professional advice here.

    4a) Additionally, the higher income spouse can formally lend money (as in with actual legal paperwork in place) to the lower income spouse. The interest rate must be reasonable (no interest free loans), and must be paid. Unless you have a really high income, then this route is likely not worth it. Definitely get professional advice here.

    Sorry, we are in the same boat ourselves for more than 30 years. It's not fair, but that's the law.
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    Trudeau ended income splitting for everybody but pensioners. Previously, under Harper, every family could split income. This was useful when one parent has a higher income. Definitely not helping the middle class and those hoping to join the middle class.
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    Does anyone know where a low income individual can do their income tax for free - for 2012 - 2016?


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  14. #14
    tightwad and proud of it! brunt's Avatar
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    Quote Originally Posted by dagney View Post
    Trudeau ended income splitting for everybody but pensioners. Previously, under Harper, every family could split income. This was useful when one parent has a higher income. Definitely not helping the middle class and those hoping to join the middle class.
    Just to be picky, the previous administration 's programs did not allow for splitting for everybody, just seniors and parents with children. We missed out on both sides.

    In my opinion, it is all household income - so why the heck should it matter who earns how much of it?
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