When a family member dies, it may be your responsibility to determine the tax obligations of the deceased and pay any balance due from the estate. You have to meet deadlines for filing the final returns, which should include all tax due, so the distribution of the estate is not delayed.

The returns for the deceased mainly work the same way as those you file for yourself, though there are some differences.

Who Should File the Returns?

If you’re the legal representative of the deceased, you are responsible for settling the estate, filing the required tax returns and paying any taxes due out of the estate. If there is a will, it usually specifies an executor as the legal representative.

In Québec, the person settling the estate is called the liquidator. If there is no will, or if the will does not name an executor, a court-appointed administrator, usually a next of kin such as a spouse, acts as the legal representative.

What Are the Deadlines for Filing?

You have at least six months to file the final income tax return, or until April 30 of the year after the death, whichever comes later. These dates are also the deadlines for payment of any balance due. If the deceased or spouse was carrying on a business, you have six months from the date of death or until June 15 of the following year — whichever comes later — to file the return.

If you miss a deadline and there is tax due, you have to pay an additional 5-percent penalty along with interest on both the tax due and the penalty amount.

What Documentation Do You Need?

The three types of documentation you need are the tax slips, business income documentation (if the deceased operated a business), and the documentation for determining capital gains. The T3 tax slips are for trust income, the T4 slips for salary and benefits, the T4A slips for pensions and the T5 slips for investment income.

Once you have advised the employer and the government of the deceased’s date of death, the T4 and T4A slips you receive will show actual amounts paid — but you may have to adjust the amounts on the T3 and T5 slips.

“One difficulty is how to prorate the income from T3 and T5 slips between the deceased and the estate and/or beneficiaries,” said Janet Baccarani, certified financial planner, CPA, CA, of Dedicated Financial Solutions in Mississauga, Ontario. “Another difficulty is to determine the adjusted cost basis for calculating capital gains on investments.”

Sometimes you can get this information by phone or online from the financial-services companies the deceased used, but for investments held for a long time, you may have to do additional research using previous years’ tax returns or additional documentation the deceased may have left.

What Returns Should You File?

You must file a T1 income tax return, and, in Québec, the TP1 provincial income tax return, called the final return. In addition, there are three optional returns that can reduce the income tax due. For income earned but not paid out, such as dividends due but not received, you can optionally file a “rights or things” return.

You can file another return for business income from a business during the most recent business fiscal year starting after the beginning of the calendar year.

An additional return gives income from a trust during a fiscal year that starts after the calendar year. You have to file the optional returns using the same forms as for the final return and with the same deadlines, except that the “rights or things” return may be filed as late as 90 days after you receive the notice of assessment from the CRA or one year after the date of death, whichever comes later.

By filing these additional returns, you may be able to deduct additional amounts from the deceased’s income, reducing the amount of tax due.

Why Filing Quickly Is Important

After you have filed the tax returns for the deceased, the CRA (or, if applicable, Revenu Québec) will issue clearance certificates. The certificates confirm that all taxes due have been paid, and allow you to proceed with the distribution of the remaining assets to the beneficiaries and inheritors.

As the administrator, you are personally liable for taxes due up to the value of the estate if you distribute assets before obtaining the clearance certificates. Authorities may even claim assets back from beneficiaries and inheritors to cover tax claims, so, although you may carry out a partial distribution of assets earlier, it’s risky to distribute all the assets before obtaining the clearance certificates.

To make sure you don’t have to delay the distribution of assets, file the tax returns of the deceased as soon as you can.

Which TurboTax Is Best for You?

When a loved one has passed, all the paperwork and legal jargon can seem a little confusing or daunting to deal with. But with the right information ahead of time, you can still navigate the tax waters to file your return with TurboTax Online.

However, if you feel a bit overwhelmed, choose TurboTax Live Full Service and have one of our tax experts do your return from start to finish.

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