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Tax Tips and Pits - Dealing with the CRA after losing a loved one
Although when a loved one passes the last thing you want to think about is paperwork, it’s important to notify Canada Revenue Agency (CRA) and Service Canada of the death so that any credits being paid to the deceased will be redirected to a surviving spouse, and any benefit due to the surviving spouse or dependent is paid. Forward a copy of the Death Certificate and a complete copy of the Will.
Regarding personal tax, the due date for the final or terminal tax return varies depending on the date of death. A death occurring between January 1 and October 31 is filed April 30 of the following year – the normal tax filing date. A death between November 1 and December 31 has a file date extended to six months after the date of death.
At tax time, if the date of death was in the prior calendar year, the type of return to file is a “terminal” return, and indicate as such along with the Executor information. So a death in 2013 means the return filed in 2014 is the terminal return.
If however the death occurs in the current calendar year and before April 30 (the tax due date), the return being prepared is not the terminal return. It’s a “regular” return with the date of death and Executor information entered, and the return signed by the Executor.
In other words, a taxpayer who passed away in January 2014 has a regular 2013 tax return filed by April 30, 2014. The taxpayer is reported as deceased on the regular return, and it is not reported as the terminal return. The terminal tax return is due by April 30, 2015.
When it comes to signing authority, if a surviving spouse is not the Executor they can’t sign.
If there is more than one Executor named in the Will, it is advisable to have all sign applicable documents if at all convenient. This is a necessity if the term “and” is used between the names of the Executors.
And if you think it doesn’t matter who signs a deceased taxpayer’s return because it’s going to be e-filed, sorry, the return, whether regular or terminal, must be mailed and CRA looks for the signature of the Executor. It’s best to again send a copy of the Death Certificate and Will.
Regarding the actual tax prep – be thorough. Ascertain all relevant tax slips before filing the terminal return. Don’t rush the final tax preparation process. A slip that shows up after filing may dictate amending and re-filing the terminal return – a tedious process.
Finally, after the terminal return is filed with CRA and any taxes due are paid, a request by the Executor for a Certificate of Clearance is needed to officially wrap up the estate. This is a basic form available on-line. Once requested, be patient.
This will likely take some time as the taxman searches all nooks and crannies in Canada to ensure the deceased taxpayer has paid everything in full – death and taxes, two certainties in life.