This is a new situation for me. Client’s father passed in February 2023. We did their final return, estate return, and applied for the clearance certificate in March 2024. I mailed it myself, so I know it went out.
In January 2025, CRA called the client because they “needed more information” from the bank before they processed the clearance certificate they received in October 2024 (postal strike?..backlog?). He faxed them what they asked for. Then in February 2025, he got a letter about slip matching and they won’t issue the clearance certificate because of unreported RIF income. They want to adjust the final return by $73k for the amount in box 18.
The unreported 2023 RIF slip was uploaded to CRA February 2025!
Don’t the banks have deadlines for this? Scotia couldn’t get this guy’s slips out 12 months after his death for the final return?
side note - This year has been insane with the number of slips CRA has for 2023 that were uploaded after April 30. I’m now just checking every 2023 return when I start 2024s. Given how many slips my clients don’t have this year, I feel like I’m going to spend Oct-Dec checking the slips on all the 2024 returns I’m doing now so I’m not doubling my work up again next March. How long until they flag us for missing slips clients didn’t have by the April 30 filing deadline?
You should have waited for the Notice of Assessment before applying for the Clearance Certificate. This has always been a “hurry up and wait” process.
I agree about the mess with the late slips. I have more tax returns stalled waiting for slips than I have been able to complete. That and the waste of time constantly going through them to see if it’s worth doing another AFR.
I mistakenly said March and didn’t give the full timeline for the filings. My fingers have been typing “March” a lot lately and I was thinking more about the recent events.
I filed the final return May 1, 2024. The NOA and refund were issued May 9, 2024. The trust return was mailed with the necessary payments May 1 as well. The Trust NOA was issued Aug 8 and had no payment due. That’s when we mailed the Cert application.
Unfortunately, and I empathize with you, CRA will likely say it’s the taxpayer’s responsibility to report a RRIF on the terminal return, regardless of the timing of slips being issued. That’s why I insist on a list of assets at the date of death from the estate’s lawyer or the executor. We normally have a good idea of what RRIF’s might be out there if we’ve done the deceased’s tax returns for years. However, it’s the returns for new clients that have the biggest potential landmines.
I have found that profit sharing slips have a habit of not showing up on the AFR.
Oh for sure they are, but that seems unjust when you are talking about a beneficiary/executor instead of the actual taxpayer. You can’t know everything about the affairs of another person, no matter how closely related you are. If a person isn’t a co-owner on an account, there is no guarantee they know about it even in a couple. There was a RIF reported, so nothing looked out of place.
The executor had no idea this account existed. Apparently, the probate lawyer was having problems getting information from the bank, but I don’t know a lot about that part. It was mentioned to me off-hand.
Doesn’t the bank have an obligation to disclose all the accounts the deceased had in February 2023 when they executor notified them he was dead? According to their own website FAQs, they should have mailed that slip to him in February 2024.
I’m just wondering what the legal requirements are here. I thought I understood them, but clearly not. I suppose I don’t go around looking for new slips on the accounts of deceased clients, but how far beyond the final return’s tax year can this happen? If CRA had dealt with that clearance certificate right away in October when they say they got it (it went across the city in the mail, not the country), then what would have happened?
The bank give themselves a deadline of Feb 28 to mail out RIF slips, but they still haven’t sent the executor anything about this account 2 years after death. We only know about it because CRA won’t issue the certificate. When CRA first contacted the client in January, we still couldn’t even see a slip on CRA and had no idea what they were talking about.
I’ve seen lawyers acting as executors who have missed reporting RRIFs on a final return (and end up paying the tax). The executor is the taxpayer’s legal representative. They’re supposed to do the digging to make sure the deceased’s assets at the date of death are identified. It’s not a responsibility to be taken lightly. The bank may be at some fault here from what you’ve described but unless the lawyer or executor specifically instructed the bank to get the information, the bank won’t admit fault. I understand that slips sometimes don’t hit CRA’s system on a timely basis but CRA likely won’t let you off the hook for that reason.
I get that. I’m not trying to get him off the hook for the taxes. It sucks, but it’s accurate.
But there is definitely going to be a lot of interest and maybe penalties too.
Is there no legal requirement for the banks to disclose information to him (or anyone by this metric) by a certain point?
This gets into my thinking on revised slips too. One of my clients got a letter from her employer last month about an internal audit and corrections to 2021 and 2022s T4s. Fortunately, that one is in the clients favor. If it wasn’t, she’s paying interest since May 2022 because she didn’t know a couple lines in her T4 were wrong?
Yes, I’ve seen this quite often, and in my experience it happens most often with Scotiabank - delays and errors on the slips. As others have noted - when doing a terminal T1 and/or estate returns, best not to trust that all slips have been issued. Get more info from the client - preferably probate docs.
I guess on the bright side of things there is another $73,000 in found money? After tax and interest that still leaves a bit left to distribute.
Of course, it would suck if the $73k RIF was paid directly to named beneficiaries back in 2023 without anyone mentioning that to the executor.
If you were preparing returns for that client in the past (and the deceased is over 71) you can generally get a decent gauge of how much they have in their RIF account(s) based on their age and the annual minimum payment.
No.
I don’t think that you can pin this on the banks. The Executor is wholly responsible for both obtaining all relevant information and documents, and also for paying the tax (either out of the estate, or out of his own pocket). If the executor is not a relevant professional, it would have been his fiduciary duty to hire the relevant professional (CPA, Lawyer, Professional Executor) to carry out those parts of the Executors duties that he was unable to.
He should have written a specific (bank confirmation) letter to each suspected bank during his search for assets phase of estate management.
He was a new client. He did have a lawyer helping him. I don’t know a lot about what they did and didn’t do to get information, but he did mention Scotia being very difficult to get any information from at all and that nobody ever seems to know what they are doing when he talks to them.
Yes, the bright side definitely is that the funds haven’t been paid out yet.
Interesting about Scotia. I dug through a few other files that had annoying issues in the past and all but 1 was Scotia related.
I had their credit card for less than month. There was a problem with their system that locked me out. I called to get it unlocked and was told I would have to wait 30 days before the could do that. I had not used it yet so I told them their service sucks, and they could close the account.
My fingers have been typing “March” a lot lately and I was thinking more about the recent events.