My spouse owes money for taxes. Am I responsible for half of the money owed? We live in Ontario

Put your mind at ease when it comes to whether or not you can be held accountable for the money your spouse owes on taxes. Click to find out why.

By Judith Holzman
January 21, 2011
ON FAQs/Tax Issues

Debts even taxes are the debts of the person who owes the money but they can impact the other spouse in various ways.

Firstly if there is joint property then the 50% interest of the debtor spouse can be liened by government taxation agency. This effectively will lien the whole of the property if it is real estate but usually the agency will only seek to collect on the half owned by the debtor spouse. It used to be believed that owning a property jointly protected against collection proceedings, but modem case law has shown otherwise.

If the asset is money in the bank then you may be called upon to prove that you contributed to the funds deposited as opposed to the funds all originating with the debtor spouse. You may be called upon to track your individual deposits to the funds to prove what of the moneys are yours.

Perhaps even more seriously, if your spouse owes taxes, it is a debt on their side of the calculation of marital assets and debts and will lessen their assets for purposes of division of assets or payment to you. As much as you may rail at the fact that they ought to have paid their taxes and that it ought not to affect the equalization payment or cash settlement that you are to receive from them, the fact is that unless you can prove that the failure to pay taxes was purposeful and plain reckless, which, depending on the circumstances, may be bard to do, their debt to the tax agency will affect what they have left over to pay you and ultimately lessens what there is for you to receive from them.

A relatively new tax collection procedure is one by which the taxing agency takes out a judgment against the debtor to protect against future bankruptcy and means that the credit rating of a debtor spouse may be affected which impacts their ability to lend money and may affect not only ability to pay an equalization payment but also possibly the ability to lend to pay bills or pay support.

Judith Holzman is a collaboratively trained family lawyer who has practiced for more than 33 years in the Toronto and York Region area. She has participated in amendments to the Family Law Act (provincial) and the Divorce Act (federal) in the area of religious divorce.

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January 21, 2011
Categories:  Financial Issues|FAQs

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