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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)
    • 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

    (reply)
    • 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.

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      • 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. 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)
    • Sam  April 29, 2017

      Hello Jennifer,

      How would income splitting be handled in a situation as above? My Mother in law passed in April. My Father in law now owes a bunch of taxes after I added my Mother in laws net income on page 1. His taxes owed jumped almost 10 fold.

      Am I missing something? I’m using Turbo Tax.

      (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)
  8. Sam  April 30, 2017

    Hello Jennifer,
    My Mother in law passed in April 2016.

    Can income splitting still be applied to my Father in law’s return. I ask this because after I added my Mother in laws net income on page 1 of his return, my Father in law now owes a bunch of taxes His taxes owed jumped almost 10 fold.

    Am I missing something? I’m using Turbo Tax.

    (reply)
    • Jennifer (Widowed.ca Founder)  May 1, 2017

      I’d suggest using an accountant to do the returns to ensure everything is entered correctly. Returns are more complicated after the death of a spouse. Also, a common error is the additional receipt that you should have offsetting any T4RIF or T4RSP income, it is often missed.
      Hope that helps.

      (reply)
  9. Colleen  May 1, 2017

    Hi Jennifer, my father passed away January 15/17. I will be doing his final tax return along with my Mother’s next year. They have dividend income which they always split 50/50. Will I only be able to split this dividend income for anything that was made up to January 15th?

    (reply)
    • Jennifer (Widowed.ca Founder)  May 5, 2017

      That is correct. You will receive the T3 and T5 slips for the joint account with both names on them for dividends received in the joint account. After the investments are transferred to an account just in your mother’s name the T3 and/or T5 slips will just be in her name. This transfer of ownership won’t happen right on the date of death but usually CRA won’t question it if you just report using the tax slips.

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  10. Nicky  February 7, 2018

    Hi Jennifer,
    My wife passed away in early 2017. I received a lump sum check from her employer and the tax taken out is 30 percent. Is there any way I can recover some or all of the taxes? I am also the executor. Sometimes we file tax together and sometimes not.

    Thank you

    nicky

    (reply)
  11. Nick Nunez  February 7, 2018

    Hi Jennifer,
    My wife passed away early 2017. I received a lump sum check amount payable to her estate minus 30 percent tax. I am the executor and the sole beneficiary of her estate. We file taxes together and sometimes separate. Is there any way I can recover some or all of the 30 percent taxes paid?

    Thank you

    (reply)
    • Catherine (widowed.ca)  February 13, 2018

      Hi Nicky,
      It may be possible to recover some or all of that tax; its’ hard to say. Like filing any tax return, it depends on all the factors; sometimes you get money back from the CRA and sometimes you don’t. The best advice we can give on filing a final tax return is to hire a professional accountant to do it. Final returns are very complicated and having an accountant to it is the best way to correctly determine how much money, if any, you may get back from the CRA.

      (reply)
  12. Jay  March 10, 2018

    My father passed away in December 2017. He left a will and named myself as his executor, however, I don’t have time or the expertise to go through the process to become an executor. His estate is severely insolvent (a number of creditors). I have also a number of lawyers, and many have said to simply not touch anything (although this is simply their free advice, given I cannot afford to pay for any further legal advice). My mother and father were married for 30+ years but she is not capable of filing his taxes or taking on the role as an executor either.

    I am looking on some direction to see if my mother or I are obligated to file my father’s taxes? What would happen if I just filed my mother’s taxes separately and simply continued to not touch anything that is related to my father’s estate? What happens to my father’s insolvent estate?

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  13. Cheryl  February 10, 2019

    Hello. I want to know if I can access my husbands cra account
    Since he passed away in Sept. 2017 I am not able to access it. I I need a copy of 2016 and 2017 notice of assessments in order to get his finally income tax done. I do have a letter stating I am the executor of the estate as at the time of death he did not have a will. Will I need to send a copy to the cra in order to get the information?

    (reply)
    • Catherine (widowed.ca)  February 13, 2019

      Hi Cheryl, sorry to hear of your loss. Yes, you will need to call the CRA at 1-800-959-8281 to provide the deceased’s date of death as soon as possible. The CRA website also states that they will need a copy of the death certificate as well as other documents, but that you would need to first register for “Represent a Client” prior to sending any legal documents. To be on the safe side, I recommend calling them first, not only to update them but to also clearly understand exactly what they need and what order to do everything.

      (reply)
  14. Thressa  April 1, 2019

    My husband passed away July 2018 and we had not completed his taxes for 2016/17. Now everything is done including 2018 and there is a hefty amount owing. Am I responsible to pay his taxes? Trying to get through to cra to talk to someone has been a challenge! Thanks

    (reply)
    • Catherine (widowed.ca)  April 4, 2019

      Hi Thressa, Sorry to hear of your husband’s passing. Regarding your question about the taxes owing, basically all debts need to be paid first before any money is paid out to beneficiaries. It would probably be best for you to consult an estate lawyer for help. You may give us a call directly at (905) 896-8373 if you would like a referral to a lawyer in your area.

      (reply)
  15. Mallory  April 26, 2019

    Hi,

    My husband passed way in January- 2019.

    I then found out he owed a hefty sum. Would this need to be paid before I take any money from the estate?

    My problem is as well CRA wont provide me with any of the letters from my late husband’s dealings with CRA and I believe that some of the amount is just penalties and I want to appeal/investigate further.

    I have heard people talk about a “fairness policy ” in regards to CRA as I think I don’t agree with his amounts likely owing.

    Any help would be great!

    Mallory

    (reply)
    • Catherine (widowed.ca)  May 7, 2019

      Hi Mallory,

      Sorry for your loss. Typically all debts and expense come out of the estate prior to any distributions to beneficiaries. You may wish to speak to an estate lawyer about your specific situation. Regarding the CRA letters, are you the executor of your late husband’s estate? If so you can fill in a CRA form called a T1013 as executor, and file it with the CRA which will then allow you access to his CRA records. Once you have that you may benefit from speaking with an accountant for help sorting out your husband’s tax file with the CRA.

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  16. Jasmine  April 29, 2019

    My father passed away in March 2018. Nothing too complicated in my parents tax file. However, I can still do income splitting if the pension income up until March (3/12) – correct?L

    (reply)
    • Catherine (widowed.ca)  May 7, 2019

      Hi Jasmine,

      Sorry to hear of your loss. Yes, my research indicates you can still do income splitting on your mother’s and father’s tax returns up until March 2018.

      (reply)
  17. Melissa  June 22, 2019

    Hello – my husband passed away in December. I am working on filing our tax returns and I am unsure if I can claim childcare expenses on my return. Typically the lower income person has to claim childcare expenses (which would have been him – his only income was CPP disability benefits). Do I have to file the returns together in the year of death? Do you think I can claim the child care expenses on my return? I don’t really want to go back to the doctors to get a statement saying he couldn’t care for the children if I can avoid it… Thanks for your help

    (reply)
    • Catherine (widowed.ca)  June 28, 2019

      Hi Melissa, We are sorry to hear of your recent loss. Regarding filing your late husband’s and your tax returns, yes you can file them together, you would just need to change your marriage status to “Widowed” and indicate that his return is for a deceased individual. You can try claiming the child care expenses on your return. If the CRA doesn’t agree and changes it, they will notify you of this on your Notice of Assessment which they usually send out a few weeks after returns are filed. If you disagree with their assessment you could then go back to your husband’s doctor for any necessary statements to support your case to the CRA.

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