Death is cruel. When dealing with the death of a loved one, the last thing you need is to have so much legal and tax work to handle for the deceased. That’s why you need to work closely with a tax accountant to help you figure out how to handle the tax returns of the deceased loved one.

Gathering All the Important Documents

First things first, you will need to collect the legal paperwork needed. Generally, you will need the following documents:

  • 1. The deceased will
  • 2. The official death certificates
  • 3. Certificate of issuance of estate
  • 4. Details of the assets the deceased owns
  • 5. Tax slips and other tax documents

The deceased will agreement will contain details on who the executor and trustee of the will is. The tax authorities will often request to speak with the executor of the will first before anyone else can be authorized to handle the deceased tax payer’s account.

The death certificate is important because it will be reported on the deceased final T1 return form. Each asset that the deceased owned will have its own unique tax considerations. Understanding the tax considerations of each asset will help to plan how the estate will be distributed to the beneficiaries.

Another important area is making sure you have all sources of income that the deceased was earning. Tax slips that were issued can be obtained by contacting the CRA. Your tax accountant needs all these details in order to properly file the final tax return.

Returns Filed for Deceased Taxpayers

    There are three main tax returns that need to be filed for the deceased:
  • 1. The Final T1 personal income and benefits tax return (mandatory)
  • 2. T3 trust income tax return (mandatory)
  • 3. Values, rights and things tax return (optional)

If the deceased earned any income after the date of decease, this is reported on the T3 trust income tax return.

Due Dates for Filing Deceased Tax Returns

This will depend on when the death occurred. The standard due date of filing T1 returns of April 30th is recommended if the death occurred between January 1 and October 31. If the death occurred after October 31 and before January 1, then you need to file 6 months after the date of death. Filing late will attract a penalty of 5% of any balance owing.

If you are the executor of the estate then you must also file the clearance certificate. This must be done before anything is distributed from the estate trust to the beneficiaries according to what is stated in the will agreement. By filing the clearance certificate, you ensure that any taxes owed by the deceased are already paid. This step is very critical as it protects the executor of the will from being held personally liable for any taxes owed. The most important step is to discuss with a tax accountant all other tax requirements and ensure they are handled properly.