“There is nothing more certain than death and taxes” say the first line of every Google search and article that you will read when trying to figure out how to file a final income tax return for your loved one who has passed on.
You can find many who have attempted to read CRA’s 33 page self-guide on preparing final income tax returns and few who have found the guide to be helpful.
Death and taxes for dummies
Why haven’t the makers of “Books for Dummies” come out with a “Filing a final Income Tax Return for Dummies”? Well I don’t have all the answers but a good start is, as in a living person’s income tax return no two people ever fit the exact same situation.
Some people will have an estate, RRSP’s, income splitting, child tax benefit, Canada Pension Plan and much more to deal with. Some will have multiple returns to file, some for living years and then the final tax return for the year their loved one passed away – that’s right folks, please keep your taxes up to date or your loved ones will be visiting your grave to vent about the real headache they have been left to embark.
Avoiding future headaches
The good news is there are a few things that every CRA, Turbo tax, H&R Block and Wikipedia will agree on. For starters CRA has a short one page document titled “Request for the Canada Revenue Agency to update records”. Fill this out immediately, that way CRA can update all their faculties and it will save you bottles of Aspirin in the long run. Without this form CRA will continue to pay the deceased the following if applicable; GST/HST credit, working income tax benefit, Child tax benefit, and others that they will then expect you to pay back once they find out that person is deceased- and you can bet they will collect their interest if it is not paid back immediately.
The Legal Representative is responsible for filing ALL required returns for the deceased
Secondly, every tax article you can find will also agree that you are considered the LEGAL REPRESENTATIVE if you are; named as the executor in the will, if you are appointed as the administrator by the court, or if you are the liquidator of the estate-only applicable in Quebec. Can I have duties of a Legal Representative for 400 please, Alex Trebek? Well since I am sure the question is worth more than 400 points to any of the general public dealing with a final tax return I will tell you.
The Legal Representative is responsible for filing ALL required returns for the deceased, making sure all the taxes owing are paid, letting the beneficiaries know which (if any) of the amounts they receive from the estate are taxable- wait is inheritance taxable? What about unused sick leave?
Lastly, the Legal Representative must obtain a clearance certificate to certify that all amounts owing to the CRA are paid. Now if you have read through this and clearly understood everything that was mentioned, then I will be the first to say your calling might have been a Chartered Accountant.
Someone. Somewhere. Eats, sleeps and breathes taxes.
For the rest of us that read this and think “Oh No”; don’t worry you are not alone. I would highly recommend that you appoint an authorized representative – hire someone who eat sleeps and breaths taxes (don’t worry they exist) to deal with CRA for tax matters on your behalf.
Avoiding the message in the mirror fog method
If you are someone reading this article that has or is thinking about prearranging then you are a step ahead of the game. As we say in Preplanning: it is easier to deal with your financial matters while you are living than trying to write messages in the mirror fog to the loved ones left to deal with them after your passing.
If you have a general accountant that you use to do your personal income taxes now, get in touch with them and have a brief meeting about gathering all the necessary documents to keep with your will so that both your loved ones and CRA are taken care of once you’re gone.
There is nothing more certain than death and taxes.