Filing a Deceased Tax Return
When someone passes away, that person’s legal representative (executor or estate administrator) has to file a final income tax return. The estate is everything that a person owns when they die, including their property and their debts. The legal representative also advises the CRA, Revenu Québec (if appropriate) and Service Canada of the date of death and sends in the appropriate documents.
When are the final tax return and the taxes owed due?
If the death occurred between January 1st and October 31st, you have until April 30th of the following year. If it was between November 1st and December 31st, they are due six months after the date of death.
Why is it important?
When someone passes away, in addition to regular income tax, they may or may not have to pay tax on what they owned. The final return is how the legal representative finds out if the deceased owes any income tax. Like all other debts, income tax has to be paid by the estate first, before people can inherit; that is called “settling the estate”. The notice of assessment for the deceased tax return is one of the documents the legal representative needs in order to get a clearance certificate and distribute property from the estate.
What is the difference between a beneficiary and an inheritor?
A beneficiary is the person, the institution, the trustee or the estate that the deceased has named in a contract to receive benefits under a will, an insurance policy, a retirement plan, an annuity, a trust or another type of contract.
For example, a spouse can be the beneficiary of a retirement plan the deceased had with his employer, or the deceased’s nephew can receive the proceeds of his or her life insurance policy. The others are simply inheritors and may have been named in the will. They may have to look into inheritance tax laws in Canada.
What do I do with cheques received after the death?
You may have to return certain cheques, but payment will definitely have to be stopped for all of them, such as:
- Child Tax Benefit,
- Child Care Benefit,
- GST/HST/QST credit,
- northern village credit and other benefit cheques.
Vacation pay is income for the deceased. Unused sick leave is considered income for the estate or the beneficiary who receives it. If the deceased had a TFSA account, no amount needs to be reported but, depending on the type of beneficiary, it may no longer be a TFSA after the death.
What information do I need for the deceased’s tax return?
- You have to know the deceased’s income from all sources, from January 1st of the year of death up to and including the date of death.
- You will probably have to look at previous returns and may have to contact employers, banks, trust companies, stock brokers and pension plan managers.
- You will gather information slips and any other documentation that you need to indicate or estimate income and deductions.
The final return cannot be submitted through NETFILE.
What if I need information from the CRA or Revenu Québec?
You will need to provide a copy of the death certificate, the deceased’s social insurance number and a copy of the document proving that you are the legal representative.
Is that it?
No! You may also use optional returns to declare certain types of income. Also, by claiming certain amounts more than once, splitting them between returns or claiming them against certain kinds of income, you may be able to reduce or eliminate the deceased’s tax payable. For any further questions, please refer to the CRA’s T4011 guide, Preparing Returns for Deceased Persons, located here