Transcript Child and Family Benefits - Income Security Advocacy Centre

Child Tax Benefits
Topical Issues and Professional
Considerations
Cindy Wilkey & Jackie Esmonde
Income Security Advocacy Centre
April 12, 2011
Adapted from CRA and ISAC
presentations
1
Overview of Presentation

Application & Eligibility

Life Changes

Shared Eligibility

Eligibility Reviews

Overpayments Recovery

Practice Issues

Objections to Benefit Determinations

Appeals to the Tax Court of Canada

Recent Tax Court Jurisprudence
2
CCTB Eligibility
The following conditions must ALL be met to be eligible
for the CCTB:

must live with the child, and the child must be under
the age of 18;

must be primarily responsible for the care and
upbringing of the child;

must be a resident of Canada, and

applicant or spouse/common-law partner must be:

a Canadian citizen,

a permanent resident,
a protected person, or a temporary resident who has
lived in Canada for the previous 18 months and have a
valid permit in the 19th month (other than one that
does not confer status).

3
Applications


3 ways to apply

ABA - as part of birth registration package

CCB Application – Form RC66

On-line using the My Account feature
CTB Amount based on previous year’s “adjusted net
family income”


2-parent families – both must file a tax return
Separated parents
 Sole custody: CTB goes to parent with primary
responsibility for care and upbringing – only that
parent has to file a return
 Joint custody – shared eligibility – each parent
must file return to get his/her benefits
4
Child Benefit Payments

CCTB/NCBS Payment levels and income thresholds can be
found at:
http://www.cra-arc.gc.ca/bnfts/cctb/cctb_pymnts-eng.html




Eligibility for CTB also determines eligibility for NCBS,
UCCB and OCB – separate applications are not required.
Initial applications take around 80 calendar days to
process – longer if information incomplete
Retroactive payments of up to 11 months are paid
automatically, if eligible.
Longer retroactive payments can be obtained through a
written request under the Taxpayer Relief Provisions
http://www.cra-arc.gc.ca/gncy/prgrms_srvcs/txpyrrlf/menu-eng.html
5
Eligibility after initial Application


Benefit year runs from July 1st to June 30th
If child leaves the care of the recipient, eligibility
ceases
 e.g. if child goes into CAS care – parents must
reapply when child returned to their care.


If child goes to live with another adult, in most
cases, that adult will be the one eligible for the CTB
If a new child comes into the care of the recipient at
any point in the year, an application can be made to
start CTB.
6
Obligation to file annual tax returns

If tax return not filed & assessed in time for July
payment


If return not filed & assessed in time for August
payment:


CRA issues Notice of Determination, advising of
missing information and advances July payment
based on the information on file
CRA issues Notice of Determination, with a bill for
one payment. No further payment made.
If filed, but not assessed in time for August pay:

CRA will issues payments based on the information
on file until the return is assessed.
7
Life Events

Certain Life Events can affect CTB eligibility and should
be reported to CRA:

Change in marital status (RC65)

Number of children changes (RC66)

Province of Residence Changes


Bank account information for Direct Deposit
changes (T1-DD)
Address changes (home and mailing)
8
Marital Status – Common Law Partner


Subsection 122.6 of the Income Tax Act defines
cohabiting spouse or common law partner
Common law partner – cohabiting with a person in
a conjugal relationship:



For at least 12 continuous months (including
separations of <90 days), or
Is the parent of the person’s child by birth or
adoption
Has custody and control of the child and child is
wholly dependent upon the person for support
9
Marital Status - Separation



Not separated in CRA’s eyes until separate and apart
for at least 90 days.
A separation agreement/divorce petition/divorce
decree is not determinative of a client’s marital status
under the Income Tax Act.
Unlike Family Law, the ITA does not recognize the
concept of living separate and apart in the
matrimonial home.


Where separated spouses/ common law partners still
have the same address, CRA will not recognize them as
separated.
An exception may exist where there are separate selfcontained living quarters within the same address.
10
Shared Eligibility

When parents split, the parent with primary
responsibility for the children is the one eligible for the
CTB.

Shared Eligibility for CTB exists when a child,
 resides more or less equally with two separate
individuals, and
 both share responsibility for care and upbringing

Where parents disagree, CRA will make its own
determination of whether both or only one parent has
primary responsibility.

CRA is not bound by court orders or separation
agreements - eligibility is based on the de facto
custody, care and responsibility arrangements
11
Shared Eligibility:
July 2011 payment changes

As of July 2011, CRA will be able to pay shared
eligibility parents 50% of the CTB benefit level every
month.
 A significant improvement over the current 6month-on / 6-month-off rotation.



The ITA amendments that permit this, will also
give the Tax Court jurisdiction to award shared
eligibility benefits
Transition to new regime will be automatic
Transitional provisions?
 Not aware of any plan to address asymmetrical
payment of CTB immediately prior to
implementation
12
Eligibility Review



Income Tax & Benefits system is a self-assessment
system that requires taxpayers to report relevant
information to establish taxes and eligibility for
benefits.
In order to monitor compliance CRA conducts various
reviews throughout the year.
Reviews can be triggered by:
 Change in Marital Status



Questions about the number of eligible children
Application by non-recipient parent for full or
shared CCTB
Inconsistent information – e.g. same mailing
address for spouses claiming to be separated
13
The Review Process



Initiated by a letter and a questionnaire
 Depending on the issue, questionnaires may be sent to
one or both parents
Typically given 30 days to reply
 CRA says that no changes should be made to the
benefits within that 30 day period.
CRA also says that benefits should continue so long as the
recipient parent respond and there is no adverse
determination, but…



Often CRA stops paying CTB until issue can be clarified.
Retro benefits payable, if separation established
If separation not established, could trigger an
overpayment
14
Marital Status Review



Most commonly triggered when a parent in receipt
of CTB reports a marital status of separated,
divorced or single, but former spouse or commonlaw partner is still using the same address with CRA
or other government agencies.
Both parties are generally contacted, but if former
partner does not respond, recipient parent has the
difficult task of proving a negative - that former
spouse no longer living at the same address.
Can result in months of CTB suspension while the
parent tries to find documentation that satisfies
CRA.
15
Responding to the Review Request


See sample letter and questionnaire in the
Workbook
It is important to respond as quickly as possible
with at least three pieces of supporting
documentation that:

Covers the full period under review

Confirms the client’s address


Confirms former partner living at a different
address
see CRA: Documents required to support your
benefits and credits
16
Possible verification documents Letters from:





landlord confirming that he/she has knowledge that the
spouse or common-law partner did not reside at the
common address
doctor/dentist indicating the dates they were informed of
the change of address and the addresses they have on file
financial institution outlining the account information
and addresses on file (i.e.. Did they close a joint account
and open individual ones?)
employer, on company letterhead, indicating the date
they were advised of the marital status change and
address change
children's school or day care indicating the date they
were notified of a marital status change and address
changes for contact purposes
17
Other possible verification documents

A signed affidavit from an unrelated person or a
person in authority confirming knowledge that they
were living separate and apart (e.g. social worker,
income assistance worker, accountant, teacher,
police officer etc.)



A letter from a member of the clergy
Legal separation/divorce documents showing
separate addresses
A letter from an insurance company in which they
can confirm/outline the dates that insurance policies
were adjusted to reflect the changes in insured
individuals/occupants
18
Other possible verification documents


Bills or letters showing different addresses
 But rent receipts and utility bills, without
information that confirms if/when the former
partner left the residence, cannot be adequate on
their own.
Other ideas?



Parents who have the least involvement with other
agencies will have the most difficulty getting this
documentation
19
Primary Responsibility Review




Usual trigger non-recipient parent applies for
full or shared CTB
letter and questionnaire is sent to the applicant
and recipient parents with a 30-day window
If parent receiving CTB does not reply, CTB
payments will stop
If both parents reply and the information is
consistent and complete, CRA will make a
determination of eligibility within a further 4-6
weeks.
20

If information is unclear or inconclusive, CRA will
request further information



CRA says that, as long as recipient responds to
deadlines during the review process, CTB
payments should continue
in fact, benefits are often stopped for months
while the issue is sorted out
Overpayments:

No overpayments where shared eligibility is
found

Overpayment will be assessed where the parent
who had been receiving CTB is found to have
been ineligible for prior periods.
21
Responding to a shared eligibility review


Must show child(ren) physically living with parent and
parent has primary responsibility for care and
upbringing.
S.6301 of the Income Tax Regulations sets out factors
such as:







Supervision of daily activities and needs
Arrangement of transportation to medical care
Arrangement of participation in and transportation to
educational, recreational, athletic activities
Care for the childe when sick or otherwise in need of care
Attendance to the hygienic needs of the child on a regular
basis
Provision of guidance and companionship to the child on a
regular basis
The existence of a court order with respect to the child22
22



Complete narrative documentation of number and
age of children living with parent during the review
period and the custody arrangements
Third party documentation – at least three
documents that cover all of the children for the
entire review period
From School
 Letter confirming enrolment and contact
information on file
 Copy of Report Card indicating contact
information during review period
 Certified copy of child’s registration document
from school showing guardian information
23



Signed statement from a person in a position of
authority who has had personal knowledge that the
children resided with the parent and can also attest
to care provided (e.g. doctor/dentist confirming
that child a patient and was brought to
appointments by the parent)
Copies of activity registrations or receipt showing
child enrolled for the review period (and parent as a
contact).
A copy of any court order or separation
agreement detailing the custody arrangements,
providing it reflects the child’s current living
situation.
24
Overpayments



CTB Overpayments are recovered from CTB and
income tax refunds
Recover rate from CTB is at a rate of 100% where
there is no financial hardship
The rate is reduced to 50% where there is financial
hardship



Financial Hardship Rules exist as an administrative
policy – not publicly available
CRA says the threshold starts at about $21,000 in
income for a single person
In extraordinary circumstances a written request can
be made for the overpayment recovery rate to be
reduced to as low as 25% - on a time-limited basis
25
Practice Issues:

Client Interview – what do you need?
 Written Authorization to deal with CRA (Form
T1013)
 CRA letter and questionnaire and any other
correspondence
 Confirm children for whom CTB being
paid/claimed
 Details of separation and possible sources of
status verification
 May need to contact family lawyer
 Need to discuss potential consequences of an
adverse determination
26



Dealing with a Distraught Client
 Any tips?
 Any cautions?
Is there a need to talk to the family law lawyer?
Dealing with contradictory or unconvincing
information from your client
 Advice?
 Issues?
 Professional responsibility?
27
Advocating with CRA

Maintaining active contact with CRA is important





Not easy - CRA officer name but no telephone number
is provided in the review letters
Clients are expect to call the CTB info line hotline: 1800-387-1193
Can make a request for named officer to call through
that line.
Important to respond quickly to avoid lengthy
benefit suspensions
MP offices have access to dedicated CRA staff
 Might want to consider enlisting MP’s help
28
Objections to Child Benefit Determinations


An objection may be filed with the CRA “Appeals
Branch” where there is a disagreement with the way
the CRA has allocated the child benefit.
An objection must be filed within 90 days of the date
the notice of determination was mailed to the
taxpayer. There are 3 ways to file an Objection:



Online using the “My Account” feature
Writing to the Chief Appeals Officer at the
appropriate Appeals Intake Centre – for residents
with postal codes starting with A to P, it is the
Eastern Intake Centre in Sudbury
Complete Form T400A – Objection – Income Tax Act
29
Objections


A person filing an objection can authorize
another person to act as their representative
by filing a T1013 form. The representative need
not be a lawyer.
The CRA Appeals Branch will review the
objection and will either reassess the benefit,
confirm the original decision or make a
determination.
30
Objections

If the objection is not filed in time, the claimant can
apply for an extension of time. It must be shown
that:






They could not object or have someone else object for
them;
They intended to object;
It would be fair to grant the extension;
They applied as soon as they could.
If the extension is granted, the objection is
considered to have been filed on the day that the
decision notice was mailed. The CRA will not grant
an extension longer than one year.
A refusal to grant an extension of time to file an
objection can be appealed to the Tax Court.
31
Appeals to the Tax Court of Canada



A Notice of Appeal must be filed within 90 days of
the date that the CRA mailed the objection
decision.
If this deadline is missed, the appellant has one
year and 90 days to file an application to extend
the time to appeal.
There are two streams of appeals at the Tax
Court:
1) Informal Procedure;
2) General Procedure.

Most CCTB appeals follow the informal procedure.
32
Tax Court: Informal Procedure


The Informal Procedure is limited to cases in
which the amount of federal tax and penalties in
dispute for each taxation year, excluding interest,
is $12,000 or less.
When the amount in dispute in an income tax
case is greater than $12,000, a taxpayer who
chooses the Informal Procedure must decide to
limit the amount under appeal to $12,000;
otherwise the General Procedure will apply.
33
Informal Procedure



The appeal is started by filing 3 copies of the notice
of appeal at any Tax Court office.
The Tax Court forwards the Notice of Appeal to the
CRA.
The CRA must file a “reply” within 60 days and then
a hearing is set.
34
Tax Court: General Procedure



The General procedure entails a much more
formal process.
An appeal is initiated by filing 3 copies of the
Notice of Appeal and filing fee at any Tax Court
office, to the Registry at a TCC office.
The CRA has 60 days to file their reply. A
response by the appellant to the reply, if any,
must be filed within 30 days.
35
General Procedure

The parties exchange lists of the documents they
will be relying on at the hearing.

Examinations for discovery usually follow.

The parties can agree to forego the above steps.

An application to schedule a hearing date is then
made.
36
Appeals to the Federal Court of Appeal


Appeals from the Tax Court of Canada are to
the Federal Court of Appeal.
In general, the timeline for appealing to the
Federal Court of Appeal is 30 days from the
date of the decision (not counting July or
August).
37
Recent Tax Court Jurisprudence: The
challenge of joint custody

There are two aspects of the definition of “eligible
individual” that are of central importance to the
Court in determining which parent gets the benefit
(see s. 122.6 ITA):
a) the parent resides with the child, and;
b) the parent primarily fulfils the responsibility
for the care and upbringing of the child.
38
Recent Tax Court Jurisprudence: The
challenge of joint custody
Residence




“To reside with someone is to live or stay with someone
in a given place with a certain constancy, a certain
regularity or else in an habitual manner” (Lapierre v.
Canada 2005 TCC 720).
But there are many arrangements in which there is a
regular schedule and children split their time evenly as
between their parents.
At least three recent cases have evaluated what
percentage of time a child spends with each parent, and
divided up the months in the calendar year accordingly.
Campbell v. Canada 2010 TCC 67; Matte v. Canada,
[2003] F.C.J. No. 43 (F.C.A.); Connolly 2010 TCC 231
39
Recent Tax Court Jurisprudence: The
challenge of joint custody
Primary Responsibility


In practice, the two factors (residence and primary
caregiver) tend to become intermingled.
Penner v. Canada, 2006 TCC 413: while the child
lived apart from her grandmother to attend school,
at all times the grandmother paid for the child’s
room and board, and made all decisions concerning
the child’s medical care or education. The child also
lived with the grandmother when she was not
attending school: “As a result, Brittany resided with
the Appellant at all times in question.”
40
Recent Tax Court Jurisprudence: Other
types of caregivers

Section 252(1) of the ITA provides that if a child is
in the custody and control of a non-parent taxpayer,
and they are “wholly dependent” upon them, that
person will be considered a “parent” for the
purposes of eligibility for the Child Tax Benefit.
41
Recent Tax Court Jurisprudence: Other
types of caregivers



Grenier 2010 TCC 234/Couture 2010 TCC 233: In
these cases, a conflict arose where the person
with whom a child was staying during the school
year (not a family member) applied for the
benefit.
The Court granted the benefit to the mother
rather than the caregiver.
Because the mother continued to provide support
for clothes, school supplies and food, it could not
be said that the child was “wholly dependent” on
the caregiver with whom he resided during the
school year.
42
Recent Tax Court Jurisprudence: Other
types of caregivers


Parents of children in foster care are disqualified
from receiving the Child Tax Benefit by virtue of the
fact that the child protection agency is eligible for a
“Children’s Special Allowance” (see s. 3(1) of the
CSA Act).
The test is whether the allowance is “payable” not
whether it is paid (Weidenfeld 2010 TCC 265;
upheld by the Federal Court of Appeal in 2010 FCA
333).
43
Recent Tax Court Jurisprudence: Living
in a Spousal Relationship


CCTB beneficiaries can accrue large overpayments in
circumstances in which Revenue Canada determines
retroactively that they are living in common law
relationships.
The income of both spouses is considered and can
result in a substantial decrease in the CCTB
entitlement.
44
Recent Tax Court Jurisprudence: Living
in a Spousal Relationship


Perron 2010 TCC 547: Former spouses living in the
same house were found to be living separate and
apart.
They each had their own bedroom and had no
sexual relationship. Social contact was minimal and
they did not share social activities. They shared
household maintenance and expenses equally, but
the mother was financially responsible for her
daughter.
45
Recent Tax Court Jurisprudence: Child
Support Payments


If one parent is paying child support, that parent
is automatically disqualified from receiving the
benefit, even if they share custody for the child.
Note that if both parents are paying, then one
parent can still claim the credit.
46
Recent Tax Court Jurisprudence: Child
Support Payments


While the Tax Court has concluded that this
legislative policy can result in unfairness, it has no
equitable jurisdiction to overrule the statutory
provisions, even where circumstances changed
such that the payor had sole custody of the child
and stopped paying child support.
A retroactive court order acknowledging this
arrangement and removing the child support
obligation for the period in question was not
sufficient to address the problem. See Dubis 2010
TCC 121; Pineau 2009 TCC 559; Beaudoin 2010
TCC 600.
47
CRA online services
Child and family benefits page
www.cra.gc.ca/benefits
Guides, forms, explanations, addresses and
more.
Benefits calculator
www.cra.gc.ca/benefits-calculator)
Calculate how changes in family situation may
affect benefit payments.
48
CRA – Info Lines
By Telephone
•1-800-387-1193
for CCTB
•1-800-959-8281
for DTC
•1-800-959-1953
for GST/HST credit
•1-800-959-2221
for Forms and Publications
•1-866-242-3167
for Appeals Branch
For a Teletypewriter (TTY) users, an agent at the CRA
bilingual enquiry service (1-800-665-0354) is available
during regular and evening hours of service.
49
Correspondence to CRA
Benefit applications and review process: Address to local
tax centre

found on the taxpayers CCTB or GST/HST credit notice,
notice of assessment or on the CRA website at:
www.cra-arc.gc.ca/benefits/address
Appeals Branch (postal codes starting with A-P)

Eastern Appeals Intake Centre
Sudbury Tax Service Office
1050 Notre-Dame Ave.
Sudbury, ON P3A 5C1
50