A note to the reader: We here at Isaac Achal Professional Corporation would like to dedicate this blog to one of our own, Abigail Singh, who sadly passed away this last month. Abigail, you touched so many lives and you are, and will always be, truly missed.
The loss of a loved one is rarely ever something that we can prepare for. We try to plan for it in the ways that we can but, at the end of the day, there are often a lot of end-of-life responsibilities to navigate that many of us aren’t aware of upon the death of a taxpayer.
Below, we lay out the groundwork for what needs to be submitted from a taxation standpoint when it comes to the death of a loved one.
Who Is Responsible For Filing For The Deceased Taxpayer?
When someone passes away, that person’s legal representative, also known as their executor, becomes responsible for advising Service Canada and the Canada Revenue Agency of the date of death. They also must file what is known as the Final Return which is how the legal representative finds out if the deceased owes any income tax.
The Final Return cannot be submitted through NETFILE and must be mailed into the deceased tax center. You can locate your closest location here.
It’s also important to note that if anything is owed, it must be paid by the estate first before any inheritance, as dictated by the deceased’s will, can be distributed.
If the deceased person happened to be paying any owed tax in instalments, no further payments must be made following their passing. The only payments that are required to be made are those that were due before the date of death.
What Kind Of Tax Return Is Filed For A Deceased Person?
There are three types of returns that can be filed after the death of a taxpayer.
The Final Return, which we walked about above, tallies the deceased’s income (including unused sick and vacation time) and estate (including investments, properties, and bank balances) to determine if there are any taxes owed before distributing it to the appropriate beneficiaries.
The Final Return must be submitted by April 30th of the following year if the death occurred between January 1st and October 31st. If the death occurred between November 1st and December 31st, it must be filed within six months of the passing.
Optional Returns can be used to declare certain types of income that aren’t applicable to the Final Return or that can be claimed in different ways to reduce or eliminate the deceased’s tax payable.
For example, some amounts can be claimed more than once while others can be split between different yearly returns to mitigate amounts owing. There are varying types of optional returns and their corresponding due dates are discussed in more detail on the Service Canada website here.
Trust Returns, or T3 Trust Returns, show income from that was earned from investment sources such as dividends, mutual funds, interest, and capital gains. A Trust Return should be filed when a trust does not have tax payable but holds property that received income, gains, or profits during the year. A Trust Return must be filed when the combined income from all investment sources is less than $500.00 but the capital is being distributed to one or more beneficiaries.
The T3 tax year starts the day after the date of death of a taxpayer and the end date can be any date as long as it falls within one year of the passing. The Trust Return is due 90 days from the chosen end date.
What Do You Do With Payments Received After a Taxpayer’s Death?
To stop payments from being issued to the deceased, you’ll have to contact the places that they’re originating from. This includes any places of employment or government institutions that they may have been collecting from.
In the meantime, any cheques that are received following the intended’s passing must be returned to the sender. These include such payments that come from the Canada Workers Benefit (CWB), the Canada Child Benefit (CCB), GST credits, and any benefit cheques.
Need Support? Let IAPC Help
When a loved one passes on, there is no aspect of a family’s life that goes untouched. We recognize the hardship of loss and the difficulty of trying to navigate what happens next – which is why we will always only be a phone call away for those that need assistance getting the matters of their loved ones settled.
Contact us today to discuss any questions that you may have.
