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Tax Debt & Spouses in Canada

Am I Responsible for my Husband’s Tax Debt Canada?

Finances can get complicated, especially when you are dealing with debt. Often two people in a relationship have very different financial situations, and this can lead to questions and potential difficulties. Licensed Insolvency Trustees aim to clarify the options available to people so they can make the best choices for their financial futures. 

Many people worry that their debts will affect their spouse, or that they will be affected by their spouse’s debt. The question of “can a spouse be responsible for tax debt?” is one that comes up frequently in discussions with Licensed Insolvency Trustees. It’s a reasonable concern, and one where the answer is not always 100% clear.

First of all NO, you are not directly responsible for your spouse’s debt.

Individual debts are held by individuals, not their spouses. This is true for any individual debt, including tax debt. However, other circumstances can and do come into play.

Can a Spouse be Responsible for Tax Debt?

Many people worry about how their financial situation and any potential insolvency processes will affect their spouse. While people are only responsible for their own debts, even if they are married, that doesn’t mean you can’t be affected by your husband’s tax debt in some ways.

For instance, if you jointly own a property, the Canada Revenue Agency (CRA) can place a lien on your husband’s half of the property if he owes tax debt and does not pay. This means there is a lien on the home you own and, even if it only on the portion owned by your husband, this will affect the process if you decide to sell the property.

That’s why it’s important to handle finances carefully and to fully understand how different choices affect your situation before you proceed.

Am I Responsible for my Spouse’s Tax Debt Canada?

As you can see, the question of “Am I responsible for my spouse’s tax debt Canada?” isn’t as straightforward as it seems. If you are worried about debt, Licensed Insolvency Trustees can review your financial situation during a free consultation and give you information on the available options. They will give you details on all options, not just the ones they administer.

If you decide to submit a consumer proposal or file for bankruptcy, the trustee will let you know how these situations will affect you and your spouse. It is then your decision as to how you decide to proceed. Most trustees offer this consultation at no charge.

Consumer Proposal for Tax Debt: Does Spouse Have to File?

Each financial situation is different and, therefore, speaking with a trustee can help you determine what is best for you. For instance, if you’re wondering if in a consumer proposal for tax debt does spouse have to file, the answer will depend on your finances.

Your partner, whether usual law or married will not be impacted by your customer proposal or bankruptcy if she or he is not liable for any of your financial debt (i.e. did not authorize a contract or contract for any one of your debt).

That said, specific info pertaining to the companion, such as earnings info, is usually needed to be disclosed in a bankruptcy or proposal proceeding which might have an effect on the proceedings submitted. Under the existing regulation, however, consisting of privacy legislation established in Ontario, it may be feasible for the companion to elect not to reveal their details. Thus, it might be possible for a private to file insolvency or proposition and also not have it impact their partner directly.

Expenditures for kids can just be asserted by one mom and dad, so it’s ideal to discuss this upfront as part of the splitting up arrangement. Usually, the moms and dad with main protection claim credit taxes for dependants, but you might intend to consider alternative setups based upon the limited tax price for each and every partner

Each partner’s financial debts are their individual obligation. Credit history bureaus track what people owe, as well as their performance history of settlement, by everyone’s distinct government insurance program number. If one spouse misses a settlement on one of their very own debts, that failure to make the payment of an amount owing in a timely fashion will certainly not affect the other partner’s credit score rating.

There is no legal requirement that your spouse needs to file a consumer proposal when you do, but it may be in their best interest to do so, depending on the situation.

Does my Spouse Own Half my Tax Debt Consumer Proposal?

One way that Licensed Insolvency Trustees help people is by giving them the information they need to help them determine the right steps to take to resolve their debt issues.

For instance, If you’re wondering if your spouse owns half your tax debt in a consumer proposal situation, it’s important to remember that each person’s financial situation is separate, except in the case of joint debts or debts where one person co-signs a loan along with their partner. You don’t automatically become responsible for your spouse’s debt when you get married.

Licensed Insolvency Trustees can help you figure out what filing a consumer proposal can mean for your finances.

Should you Combine your Income Tax Return Spouse Debts CRA?

Taxes can get complicated, especially if you and your spouse have very different tax situations. One example of this can be seen in the question of should you combine your income tax return spouse debts CRA.

If your spouse owes money to the CRA and you do not, there are several ways to approach this situation. It’s important to note that the CRA does not let one spouse’s tax refund offset the balance owing for the other spouse. You may, however, be able to share or transfer tax credits to lessen the tax burden for one spouse.

Speaking with a trustee can help you understand your options and recognize the best route to take to improve your financial situation.

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