Upon the death of a loved one, the executor will have a list of responsibilities to fulfill, including closing the file on tax obligations and debts.
The executor must first inform the Canada Revenue Agency and Service Canada of the death. This is to ensure that all benefit payments stop immediately. You will need their social insurance number and a copy of the death certificate.
Next, the final tax return needs to be filed according to the following timeline:
- Date of death between Nov. 1st to Dec. 31st – Tax return due 6 months from date of death
- Date of death between Jan. 1st to Oct. 31st – Tax return due April 30 of the following year
In addition, there could be 3 optional returns to be filed. Report income earned after the date of death on a T3 (Trust Income Tax and Information Return).
The final income tax return is completed in a similar fashion as usual, reporting all incomes (employment, pension, retirement, investment, pandemic) received prior to the date of death. This may take some work to contact employers, banks, brokers, etc. to get the documentation needed. It can be E-filed or paper filed to the Canada Revenue Agency.
Once the tax return has been filed and the Notice of Assessment has been issued, the executor can apply for a clearance certificate. A clearance certificate as defined by the Government of Canada is as follows:
- Confirms that an estate of a deceased person or a corporation has paid all amounts of tax, interest and penalties it owed at the time the certificate was issued
- Lets the legal representative distribute assets without the risk of being personally responsible for amounts the deceased, estate, trust or corporation might owe the CRA
- The Canada Revenue Agency (CRA) gives a clearance certificate to the legal representative of:
- Someone who has died
- A trust or corporation that has wound up or dissolved
As noted in the second point above (in italics), it is important for the executor to have the clearance certificate prior to the distribution of assets to avoid taking on any personal risk.
We understand that the role of an executor is even harder given the circumstances. We can help with preparing the final tax return for your loved one. Contact us to learn more.