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Executor's Fee

I have a client who’s dad passed away in 2019. She had an accountant prepare the Estate return. As Executrix she took the 5% fee. She received $10,000 in total. That accountant has told her she does not need a T4 issued for it, she can just claim it as “Other Income”. Is this correct, or does she need a T4 slip as I thought she has to have the CPP and Income Tax deducted from the $10,000. If she does need a T4, I know both the “employer and employee” portion of CPP needs to be paid but how is the tax withheld calculated?

Her father did own a business when he passed. She is not in business as a professional Executrix.

Any help is greatly appreciated.

Sandra

Not surprising that the “accountant” said just declare it.

There should have been a T4 issued with CPP, possibly Tax but no EI.

You can fight the war with the “accountant” or declare it as self employed income on aT2125 and pay the CPP that way.

It is NOT Other Income

Much better if the accountant would issue a proper T4

I had a client with a similar situation a couple years ago and I reported it on Line 130. CRA did subsequently review it in some detail but eventually agreed that it was OK as it was…

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@Norman is correct. T4 with CPP and (optionally) tax. Estate needs a remittance account.

And just a comment about “taking” the 5% fee. At least in BC, if reviewed by the Court, this would only be generally allowed for the most complex of estates. Any other heir could challenge the fee and likely win a reduction. Typically allowed is around 2-3%, but more often the heirs “agree to gift” out of their portions some funds to the Executor so that it is not taxable.

“As Executrix she took the 5% fee She received $10,000 in total.”

I shudder to think what the Estate accounts actually say. The correct amount and form would depend on what the Will actually says, and/or the approved estate accounts for the relevant period.

If the Executrix is not in business AT ALL, she is personally liable to have set up a payroll account on behalf of the Estate, pay the AUTHORIZED amount, deduct and remit the CPP, and file the T4 summary by due date. (S6(1)(c ) income)
So if that payment happened in 2020, she still has a few days left to file the T4/summary on time. (Although the cpp remittance, as applicable, may be late already).

(If the executrix is a gst registrant in business, then she may well be personally liable to charge, collect, and remit GST on that $10,000.00)

Hopefully the accountant did not deduct the $10,000 as a tax-deductible expense on one of the Deceased’s final/trust returns…

Regarding employment withholdings etc, see the “Trustee” section of T4001:
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4001.html