I am doing 2018 & 2019 returns for client who died on Jan 20th of this year. He has a T4OAS for 2020, how should I file this?
The Executor should ensure that he/she hires an accountant who is familiar with potential tax liabilities upon death, since the Executor becomes personally legally responsible for taxes to the extent of the Assets in the estate.
You should discuss this matter with the Executor of the estate, as there are more tax returns to be filed than you mention.
Although the deceased was alive in 2018 and in 2019, and tax returns routine, the Executor could still find themselves personally liable…
It is extremely unlikely that the Executor would be engaging you to prepare a “deceased return” as such at this time.
Its a simple estate, no assets or trust accounts, he just died this year so 2018 & 2019 are unaffected.
At this point, it is unlikely that the Executor yet knows for sure how simple or complex the Estate will turn out to be… or whether he/she will be on the hook for taxes to the extent of distributed assets…
Every estate has some assets - Since the Executor has not (yet) given you a copy of the Estate accounting, it is unknown what the assets and liabilities are…
First obtain an engagement letter from the Executor for the 2018 and 2019 returns before proceeding further. At this stage, I assume that it will still also still be unknown if or when the purported Will will be validated by the court.
On his 2020 return.
Be careful, though, Jim, since there will likely be several other things to go on the 2020 return, and it sounds like the Executor has not engaged a T1-final accountant yet…
The OAS received in January 2020 will go on his final 2020 T1 return, along with the CPP and any interest income from Jan to the date of death. Any remaining interest income, until the estate is settled (takes time even if it is a simple estate), will go on the estate return. The CPP death benefit can either go on the estate return or on the tax return of the person who received it.
There could also be a workplace pension or death benefit to consider and possibly workplace life insurance (tax free and non-reportable).
If the account generating interest income is a joint account, then the interest generated after the date of death belongs on the survivor’s tax return rather than the estate return.
Yes, I know that any pension income rec’t needs to be reported, my question is do I file a second tax return with 2019 tax forms since he needs to file within 6 months of death? BTW, no sin his account, last of it paid his last mortgage payment, beneficiaries on title for home and still live in said home.
So how do I file a 2020 T1 return when we have no software for a 2020 return. T1 return must be filed within 6 months of death, no 2020 software will appear in this timeframe.
" since he needs to file within 6 months of death? "
“T1 return must be filed within 6 months of death”
No, the Executor does NOT have to do that. That is not the procedure of the T1-final.
As I noted above:
“The Executor should ensure that he/she hires an accountant who is familiar with potential tax liabilities upon death, since the Executor becomes personally legally responsible for taxes to the extent of the Assets in the estate.”
For 2020, the Executor will have to a lot more first, by the sounds of things. It is mentioned that the deceased has beneficiaries, yet there has been no talk of distributions or disposals, or any 2020 accounting at all really…
Due date is the later of 6 mo from date of death or April 30, 2021.
You can either wait until the software is available or do a 2019 paper return, cross out the year and put 2020. I have not done the latter very often and not recently. You should also be aware that CRA will not necessarily accept 2020 returns as parliament has until December 31st, 2020 to amend the ITA for the 2020 taxation year.
Final (2020) T1 is filed either 6 months after the date of death or April 30, 2021, whichever is later. The estate return is filed either 90 days after the estate is wrapped up or one year after the date of death, whichever is earlier. There could be a second year tax return for the estate, depending on how long it takes to settle (probate can take some time due to a backlog at the Ministry).
Potentially, after someone dies, there could be numerous outstanding T1s predating death, as well as several T1s upon death, as well as several years of T3 Trust returns to follow.
The interests of the Client are the ones that are paramount, not the interests of a tax preparer.
The (post-death) Engagement letter of the EXECUTOR (client) hiring the ACCOUNTANT should clearly reflect all the terms of the engagement. Such Estate accountant needs to be able to properly advise the EXECUTOR what tax returns the EXECUTOR will need to file, and when to file them, as well as advise about any potential Elections. To do any less would put the client Executor at potential risk, which is not in the best interests of the client.
Yes there is so much to be aware of. Not sure where you got the idea that anyone had their own interest at heart instead of the client’s.
I always advise my clients about the various elections within the final return and the optional returns, filing deadlines for those returns and also the estate return(s). Each situation is different and it’s important to remember that the executor may be experiencing their own grief over the death of a family member.
Message to everyone: The tax preparation for the deceased is not the same as for the regular tax returns, as different and additional rules apply. If you need any help, please let me know.
Let me recap, died in Jan 2020, no assets (bank account empty), no investments. Beneficiaries are on title of home and still live in said home. Recèd some OAS, CPP and pension income in Jan before death. Lawyer has asked me to file 2020 final T1 return when they get T4s for this income. So can I use 2019 tax software and have executor send in paper copy as suggested (cross out 2019 and replace with 2020?).
Yes or tell lawyer that the 2020 return isn’t due until April 2021
You said that the deceased died “on Jan 20th of this year.”
You also said:
“no assets (bank account empty)”
“Recd some OAS, CPP and pension income in Jan before death”
If this is the case, you might want to go to Church and have a word with Jesus, since it sounds like Easter Sunday came early in this household…
I, for one, am EXTREMELY EXTREMELY glad to NOT be Executor for this Estate…
Beneficiaries are executors, deceased made estate planning arrangements with lawyer beforehand to minimize probate and estate settlement delays.
Nevertheless, the facts stated are clearly in error.
Again, I, for one, am extremely glad to NOT be Executor (or accountant) for this Estate…