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Preparing a Final Tax Return

Preparing a Final Tax Return

When a loved one passes away, you will have many tasks to tend to and decisions to make. One of those tasks may be completing the individual’s final, or terminal, tax return.
The first step is to inform the Canada Revenue Agency that the person has passed away. You can call the CRA at 1-800-959-8281 or you can file form RC4111. The CRA provides the booklet “Preparing Returns for Deceased Persons” to help you; ask for a copy.

You will need the person’s social insurance number. To enable the CRA to discuss the deceased’s file, or release any information, you will also have to provide a copy of the death certificate and the Will or other document proving that you are the estate’s legal representative.

To complete the terminal return, first write in the identification section “Estate of the Late” before the person’s name and fill in the date of death. Gather information on all income the person had: annuity payments, pension amounts, salary, rental income, investment earnings, etc. Note that the Canada Pension Plan Death Benefit is to be reported by the person who receives it, not on the deceased’s return.

If any income is earned by the estate after the person has died, such as income on rental property or investments, you will need to file a T3 trust return within three months of the first anniversary of the death.

You may also file other returns on behalf of the estate that essentially divide income and therefore reduce taxes. These are optional, so definitely talk to your accountant about whether any of them could benefit you or the deceased’s estate. First is the return for rights or things. This return is for all amounts that hadn’t been paid at the time of death but would have been considered income if they had been paid. Second, you may also file a return for a partner or proprietor, on which you can report any income from the previous fiscal period. Finally, you may file a return for a testamentary trust.

The deadline for filing the terminal tax return depends on when the person passed away. If they died between January 1 and October 31, the return and any balance owing are due by April 30 the following year, as it normally would be. If the person died in November or December, you have six months from the date of death to file the return. There could be penalties for filing late, so make sure this job doesn’t get forgotten. Also make sure that a return has been filed for the year previous to the one in which the taxpayer died. For example, if someone dies early in 2014, they may not have filed their 2013 tax return yet. So you will need to ensure that both the regular 2013 return and the 2014 terminal return are filed.

After the Notice of Assessment is received from CRA for the deceased’s last tax return, the executor should send form TX19 to CRA to request a Clearance Certificate to indicate that there are no taxes owing. This Certificate should be received before distributing all the assets in the estate.

Managing the financial affairs of someone who has passed away can be complicated, and if you’re not familiar with the ins and outs of the Income Tax Act you may end up paying more tax than you have to or missing a deadline. Your best bet is to talk to a professional estate-planning advisor or accounting professional, such as the team at DFS Private Wealth, to ensure you are taking advantage of everything that’s available to you. As the authors of Managing Alone: Your Trusted Advisors’ Guide to Surviving the Death of Your Spouse, they have the knowledge and experience to guide you through this difficult time, contact them today.

Discussion

  1. Cindy Skakun  October 4, 2015

    Hi,
    My spouse passed away Jan 2014. we are legally married in BC but she is an American. How do I, and is there Death benefits?
    I have a photo copy of the death certificate. The family has the original. As she named them POA. She never go around to update her will.

    Sincerely,
    Cindy Skakun

    (reply)
    • Profile photo of Jennifer (Widowed.ca Founder)
      Jennifer (Widowed.ca Founder)  October 5, 2015

      Cindy,
      In order for their to be death benefits she would need to have a SIN number. You can contact Service Canada for additional clarification, 1-800-277-9914. With no Will in place you are going to need someone to be appointed the Estate Administrator and then her assets will follow the specific provincial division rules. Each Province is different.

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  2. Janet  May 26, 2016

    Hi, I am executor of my late father’s estate. He died October, 2015. I have filed his 2015 income tax. Probate was not issued Until April 2016. I will have to file a T3 trust for the revenue received into his estate account in 2016 (death benefit, RIF, mutual funds, etc). My question is: I understand I have to file the T3 within 90 days of the anniversary of his death? Is that correct, and if so, I will not have Tax slips by that point to support the tax return. I checked with the bank and they only issue tax slips once a year in February. If I have to file 90 days from mid-October that puts me at a mid-January deadline which is before tax slips will be received. Is this info correct? Thank you

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  3. Lili  February 2, 2017

    Can a widows benefit be taken by income tax

    (reply)
  4. Sonam  April 14, 2017

    Hi jennifer
    Thanks for founding this site. My dad ( low income senior). Passed away in sept 2016 at age of 84. Unfortunately he died without a Will but all assets ( bank accts, land title etc) were joint w my mom. I’ve been my parents sole caregiver for many years so it fell on me to deal w everything. I sent in the form for Cpp Oas and managed to get the death benefit from cpp and also survivors pension for my mom after 6 months. Btw would that be same as contacting CRA first as you noted above? I don’t remember calling CRA as its a blur as I was so stressed out at the time. If CPP and OAS depts know about his death do you still have to contact CRA? Re the Final Return … With all assets joint w my mom and no Will, there is no Estate.. Is it ok to just file the Final Return as if he would’ve filed it if he were alive. Being low income bracket in last few years his returns were quite simple w no taxes owing so I feel I can manage filing it by looking at how he filed previous years. Would really appreciate if you could advise me. Thank you.. Sonam

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    • Profile photo of Jennifer (Widowed.ca Founder)
      Jennifer (Widowed.ca Founder)  April 14, 2017

      Sonam,
      When you file the final tax return you will notify CRA of his passing that way. You do not need to contact them separately. It sounds like you are on the right track and should be able to go ahead and file the final return.
      Hope that helps.

      (reply)
      • Sonam  April 15, 2017

        Thanks so much jennifer… Really appreciate it… Yes it helps. I will do that. I’ve been buried in details and paperwork since his passing dealing w everything and the funeral home neglected to send in the cpp forms for the pension etc and after 12 wks I called service Canada and found out they never received the firms so had to let the funeral home know and they finally sent it off which took a long time so it took nearly 6 months for any survivor pension. Thank you once again for your kind reply and now I better get started on doing the final return. ?

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  5. Sonam  April 16, 2017

    Hi Jennifer
    Another question. Since my dad passed sept 2016 what is my moms filing status…is my mothers filing stays a widower or married? Does she still have to write down his income on the first page of return. Technically she became a widow in sept 2016 but on few sites it mentions that if spouse dies any time of year fir tax purposes you are considered married for that year. Thanks.. Sonam

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  6. Profile photo of Jennifer (Widowed.ca Founder)
    Jennifer (Widowed.ca Founder)  April 17, 2017

    Sonam,
    Your mother should file as Widowed because that is how she ended the year. She should include his income on the first page of the return and should also include the date of marital status change which would be his date of death.

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    • Sonam  April 17, 2017

      Thanks so much Jennifer…you and your site are awesome.! ???

      (reply)
  7. Sonam  April 17, 2017

    Sorry … Emoticons don’t seem to work here…. I put smiley faces and it turns into question marks! So just saying THANKS THANKS THANKS!

    (reply)

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