One of the most grueling tasks of a family law proceeding is the hunt for proper financial and property disclosure. Often the tricks and tasks once utilized by both parties to keep their hard earned money at the lowest taxable amount often become a nightmare to rectify in order for proper child and spousal support amounts to be determined. Of course in a perfect world, both parties would be fully aware of the financial dealings, banking information, and property holdings of their spouse. However, more often than not, one spouse takes charge of the family financing and the other trusts that everything is in order as long the bills are paid and the credit cards still work. An added plus to many households is when one or both spouses are self-employed and are able to take advantage of the many tax deductions that the Canadian Revenue Agency (CRA) has afforded them. When a separation occurs, what once was a blessing can become a disaster as the powers held by self-employed spouses to present their income forces the other party to request and review often large amounts of documents to prove the reality of what the self-employed spouse is making.
There are some steps that can be taken to ensure that self-employed former spouses are not able to hide or present improper income amounts. These steps can save clients both time and money in family law proceedings if they are willing to put in the effort:
Step 1: Be aware of your reported income and that of your spouse. Ensure neither spouse misses filing their income tax returns with CRA on an annual basis and if possible keep copies in the home that you can access if necessary.
Step 2: Be aware and try to understand how your spouse is reporting their income for tax purposes. If they are self-employed there will be separate schedules (that are listed on the CRA website) that must be filled out in order for them to exercise their rights to certain tax deductions such as travel and home office use. Many times self-employed individuals will try to maximize their deductions to avoid paying taxes which in turn can lower their reported income. However, for support purposes a self-employed spouse’s gross income can be used if such deductions appear to be out of proportion with their type of employment or over inflated to decrease taxes payable by that spouse.
Step 3: When in doubt make copies. When parties separate it can make a huge difference in both time and money in reaching a conclusion to their family law matter if clients can make copies of any and all of the following documents:
- Tax returns
- Banking and credit card account information
- Property assessments or receipts of purchase
- Documents relating to debts (either for both parties or an individual party)
- Life insurance and general insurance policies
- Copies of estate planning documents such as Wills or letters of inheritance
- Copies of vehicle registrations and insurance information
Following these steps in preparing yourself for your family law matter in Toronto will go a long way to ensure that your matter is completed effectively and in a timely fashion. Make sure to schedule a free consultation if you require further information.