I have a client who was widowed for all of 2017. In 2018 she got married. She married someone whose wife died in 2018. I have been asked to do all three returns. How do I set this up in Taxcycle?
Let’s assign names: Joan was my client in 2017 and was widowed for all of 2017. In July 2018 she married Fred. Fred was married to Linda until her death at the end of March 2018. Fred wants to do pension income splitting with Linda… Fred wants to transfer tuition credits earned by him in 2018 to Joan. My question is how do I set all of this up in Taxcycle. I will be asked to efile all three tax returns.
@alcotaxprep
Wow. That’s one I haven’t seen before, and wouldn’t expect to…
I think you will need 2 separate files - one for Fred and Linda, and another for Fred and Joan. And, you probably won’t be able to efile them both - once you have efiled a return for Fred, you can’t logically have a second return for the same year. I’m guessing CRA’s efile service will reject the second one. This is kind of like pre and post bankruptcy returns - it might be best to paper file them both, with an explanatory cover letter.
But, just setting them up in Tax Cycle is tricky.
If you didn’t have Fred and Linda as clients in a previous year, I have found that you have to set it up with marital status as “Married”, enter data for both spouses, and once that is done, enter Linda’s date of death. (If you start by entering Fred’s info, with marital status as “widowed” it won’t let you enter Linda’s info in the same file.)
So, at the “end” of that file, Fred’s marital status will be “widowed”, and this should be his “previous marital status” in the second file (for Fred and Joan).
Can you post a response after you get it to work? It would be good to know for future reference.
Thanks!
The surviving spouse and his deceased wife (Fred and Linda) are required, according to CRA, to file paper returns since they are electing to do pension income splitting. The signed T1032 must be attached with the Fred (the executor) signing for Linda.
Because Fred remarried in 2018 the same year his wife died I will have to show his marital status as married on his 2018 tax return. CRA suggests that an explanatory note be attached to the two paper filed returns. His current wife, Joan, should likely be paper filed and bundled with Fred and Linda’s returns.
The work around that you suggest with Taxcycle should be fine since I am not planning on efiling any of the three returns.
Thanks for your input Nelson. Much appreciated.
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I’m assuming you called CRA about this because you now have it 100% correct. And I would absolutely send all 3 as paper and in the same envelope with a letter of explanation.
Less than four months from death of spouse to remarried is more than a little icky. How needy is this guy and is Joan really understanding his motives? I hope it all works out for them, but I’m glad they aren’t my clients…
Another more senior agent at CRA now informs me that Fred is NOT allowed to do any pension income splitting with his deceased wife, Linda (who died in 2018), because he remarried in 2018. CRA informs me that he is permitted, however, to do pension income splitting with his new wife Joan if applicable. In addition he is not permitted to transfer unused tuition from his deceased wife Linda again because he remarried in 2018. But since my last post I also learned that Linda has a DTC. CRA informs me that Fred is allowed to transfer the DTC from Linda if it otherwise goes unused on Linda’s return (which it is). So after all is said and done the only thing Fred is allowed to do is transfer the unused DTC from his deceased wife to his 2018 return. CRA suggests that I go ahead and efile all three returns as usual and do a T1 adjustment for the DTC transfer after Fred’s 2018 is assessed rather than trying to claim it on Fred’s initial efiled return since his 2018 return will only record his current spouse on the T1 jacket.
I had a client in a similar position a few years ago. Husband died in February. Wife remarried in May. Second husband died two years later. Hmmmm. Great woman, just very unlucky. Interesting tax returns, though.
I wonder if the allowable transfers is based on a calendar year eFile processing limitation only. I wonder if you could eFile as suggested by CRA. Then paper file with an adjustment request based on best calculation. This would be similar to the workflow of requesting a best tax calculation on lump sum payments and other types of returns.
I would also consider asking for a ruling.
Maybe this might be a case for the new CRA DTS service.
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