Also, thank you for all your responses! Super helpful post!
All one needs to do is paper file the return with a note that the income of the deceased spouse is unknown. Prepare it like @SmallBizGuy would do it by plugging in $50k in Schedule 2 so no credits are claimed. As long as you made CRA aware of it the tax preparer should be in the clear.
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Did you get that from CRA in writing?
Having been involved in tax for almost five decades now, I find it surprising that so many tax pros are - at least in my opinion - overly cautious, to the point of …well, something. So far, third-party penalties have been applied only in EGREGIOUS circumstances, and this is what the law provides, not making a reasonable, and calculated effort to assist.
In the IC quoted above, the word “MAY” needs to be looked at…it’s not “WILL” or “SHALL BE” and it only applies in the event of a “false statement”.
Also instructive is a portion not provided above:
28. In the absence of actual knowledge of a false statement, culpable conduct must be present for the third-party penalties to be considered.
29….
30. Culpable conduct is a higher and more exacting standard than simple negligence. It is defined with reference to the types of conduct the courts have considered when applying the gross negligence penalties under subsection 163(2) of the ITA. …
There is also a lengthy segment on “Reliance in good faith”…which is where 99% of what we do arises. (I have no idea, when I get a T4 from someone if it’s “real” or “fake” eg….my good faith assumes it is “real”.)
Preparing a return, in good faith, with an attempt that is reasonable to NOT claim undue amounts does not meet any of the standards above. Note that the IC was just re-released and updated on Feb 17, 2026.
And, as a final note, penalties may only be applied where tax is reduced…which is why plugging the return to prevent unwitting credits and transfers is applicable in the first place.
Our jobs, as tax pros is to represent our clients and get the best possible results for them…applying the law reasonably and accurately and representing them in good faith.
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Thanks, @SmallBizGuy for your common sense approach; listening to some i almost lose confidence in my approach, but you restore that confidence. And I am sure it is not misplaced confidence.
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Maybe it’s too much, but like I always said, the legal speed limit is 50, in most street, but we see people driving 55, 60, 65, even have cops beside them, and never get caught, does it mean it’s legal, no, it’s not, if it gets pull over, it’s illegal, there is no way around it, even myself drive over 50 most the time, but we can never tell people, it’s okay to drive 60 in a 50 zone, you just can’t do that.
“A business man passed away before doing their taxes and it’s impossible to know what their income was. No records, no statements. No executor of the wil. Widow is now trying to submit their own taxes”
This is deeply troubling.
A “businessman” who is in violation of Section 230 and a whole lot more besides.
A “widow” who pretends that she has no knowledge of any assets or any income or any cash or any savings or any bank accounts of her husband.
A “widow” who has somehow managed to bury her husband without having a clue who his legal personal representative is, or whether he had a will or not, or who is the administrator of his estate?
I would not touch this with a 40 foot pole unless somebody started telling me the truth
Well, now that you put it THAT way……….
I wouldn’t touch the deceased’s file - and indeed nobody should until an executor is appointed (probably by a Court).
But the widow? Unless I have reason to believe that the widow is hiding something, that really is a non-issue. I have clients whose spouses haven’t got a clue about their affairs, so that, in and of itself is hardly unusual or problematic.If, in preparing the widow’s return other consequential issues come to light, that might change my position, but otherwise, the widow is still entitled to service.
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If No One Wants to deal with the estate…
If no family member, beneficiary, or creditor applies to administer the estate:
The estate remains unadministered at first
The court does not automatically intervene unless there is a reason.
A Public Trustee May Step In
If there are assets that need protection or no one capable/willing to act, the province’s public office may intervene.
For example:
-
Office of the Public Guardian and Trustee
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Public Guardian and Trustee of British Columbia
They may administer the estate if:
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There are minor beneficiaries
-
There are incapable beneficiaries
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There is no known next of kin
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No one applies within a reasonable time
Good for you, you can do it as it’s your choice, but you can not say it’s legal, it’s not legal
“reason to believe that the widow is hiding something”
Of course the widow is hiding something.
Willful blindness may be practiced by some clients
A “shrug” is not a real answer when the professional asks the client for details of the file
That is an assumption, neither borne out by experience or evidence. (The widow is, I assume, not your client. Only OP can determine that. I’ve had a number of clients over the years who have no clue about their spouse’s income - especially when self-employed or owner-manager,)
I’m too old for this kind of discussion. I’m out.
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A businessman sick with cancer for 8 months of the year can’t keep up with his books. Normal.
A widow who has knowledge of her own shared bank account but no knowledge her her businessman husbands business account. Normal.
A couple with no assets, no need for a wil with no assets. Seems pretty simple to me. Normal.
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“A businessman sick with cancer for 8 months of the year can’t keep up with his books. Normal.
A widow who has knowledge of her own shared bank account but no knowledge her her businessman husbands business account. Normal.
A couple with no assets, no need for a wil with no assets. Seems pretty simple to me. Normal”
Perhaps “normal” on this forum -
But nothing “normal” about that in marriages, or in Estate administration, or in the income tax act, which provides (Sections 230, 238, 239) for jail terms for “not keeping up with his books”
Especially since he was not run over suddenly by a bus one morning - the cancer gave them both a heads up.
If that (potential) client was mine, I would stay at the end of that 40 foot pole until somebody told me the truth —- just sayin’
I don’t agree with that.
For example, it’s pretty common for wives in Mennonite communities to sign what they are asked to sign, trusting their husbands to be doing things correctly out here in the broader world.
I won’t get into the complexities of a real situation I’m dealing with to help a defrauded client, but this is a complicated world. Not everyone is willfully blind or acting in a criminal way because they don’t have information. It isn’t that hard to hide things from a spouse even by those of us who live “modernly”.
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I feel bad for some clients, or things that i seen, but that doesn’t mean I can help them to do something illegally, no matter how small. Or do something illegally to help them. It’s the fact that some people, thinks okay to disobey the law, because they think its immaterial, without facts or evidence. We are not law enforcement, we are not lawyers, we don’t deal with laws. Do not justify our actions