We recognize that the process of filing taxes can be challenging, but navigating tax returns for a deceased loved one can be an even more daunting task.
To help you, we've created a simplified step-by-step process of filing a terminal tax return.
1. Apply for authorized representative
One of the first steps an executor must take when dealing with the estate taxes - is to notify the CRA.
To do so, the executor has to apply to the Canada Revenue Agency (CRA) to become an Authorized Representative. This status grants them access to the deceased individual's CRA account.
With this access, the executor can view and handle all outstanding tax returns, which is a crucial part of settling the estate. This role also allows them to review notices of assessment, ensuring any due taxes or refunds are appropriately addressed.
Moreover, the Authorized Representative will be able to access important filed tax slips such as T4s, T4A, T3, and others, which are crucial for accurate and efficient tax filing. These documents are uploaded within the deceased's CRA account, providing all necessary information at their fingertips. This streamlines the process and alleviates some of the administrative burdens during this challenging time.
2. Gather the Necessary Documents
Gathering the necessary documents needed by CRA assists them in getting an overall picture of your deceased loved one's financial situation. Canada requires the legal representative to submit documents containing all income and expense sources.
They include:
- Previous tax returns: This document helps the CRA to analyze the deceased person's financial history, unused tax credits, and carried forward deductions.
- Statements of Accounts: Having the deceased person's investment accounts, bank accounts, and other financial holding accounts helps CRA measure their assets and earned income.
- Notices of Assessments: These documents given by CRA prove the deceased person had been reporting accurate tax information.
- RRIF and RRSP statements: Statements of the Registered Retirement Income Funds and Registered Retirement Savings Plans help to assess if the deceased person made any withdrawals.
The following table summarizes other documents you need to have:
Terminal Tax Return Document Needed | What it Covers (Purpose) |
T3 | Trust and estate income |
T4 | Employment income (salary, wages, and commissions) |
T4A | Self-employment income and pension income |
T5 | Investment income (dividends, mutual funds, and interests) |
Statement Of Business | Business income and expenses |
Property Sale Documents | Purchase agreements and statements of adjustments |
3. Fill Out the Tax Return
When filling out the tax return, it is mandatory to use the regular T1 income tax return form provided by CRA. The T1 form is also called the Income Tax and Benefit Return. All Canadians use it to file their personal income tax.
In this unique situation, you must indicate on the form that the return is for a deceased person.