Tax Return for Deceased Person

Tax Return for Deceased Person

Tax Return for Deceased Person

Tax Return for Deceased Person

Tax Return for Deceased Person

Death is an inevitable part of life and at some point in time we are all affected by it. During this difficult time, we are hoping this guidance will help provide some ease from a tax perspective for those affected.

Legal representative

A deceased’s legal representative is the person named in the will (executor) or a person appointed to handle the estate if there’s no will or executor.

As the legal representative, it is your responsibility to:

  • file all required returns for the deceased;
  • ensure that all taxes owing are paid; and
  • Let the beneficiaries know which of the amounts they receive from the estate are taxable.

There are many different returns that impact the deceased taxpayer and it is important to understand the difference between each.

Final return

This type of return must always be filed for a deceased person. On the final return, report all of the deceased’s income from January 1 of the year of death, up to and including the date of death.

Penalty for late-filing a final return – If you file the final return late and there is a balance owing, CRA will charge a late filing penalty. CRA will also charge you interest on both the balance owing and any penalty. The penalty is 5% of any balance owing, plus 1% of the balance owing for each full month that the return is late, to a maximum of 12 months. Even if you cannot pay the full amount owing by the due date, you can avoid this penalty by filing the return on time.

T3 Trust Income Tax and Information Return

This return is used to report income earned after the date of death.

Below are examples of type of income to report on the T3 return for the year in which you receive the income.

  1. Severance pay received because of death. Since this is a death benefit, up to $10,000 may be non-taxable.
  2. Future adjustments to severance pay regardless of when the collective agreement was signed.
  3. Refund of pension contributions payable because of death.
  4. Guaranteed minimum pension payment. This is not a death benefit.
  5. Deferred profit-sharing plan payment.
  6. Pension or retirement periodic payments.
  7. I.A.A.C. annuity.
  8. Income earned in a RRIF after annuitant dies.
  9. Income earned in a RRSP after annuitant dies.
  10. CPP or QPP death benefit, if not reported by the recipient.

Optional returns

In addition to the final return, you can choose to file up to three optional returns for the year of death.

Information about the deceased’s income sources will help you determine if you can file any of these optional returns. You do not report the same income on both the final and an optional return but you can claim certain credits and deductions on more than one return. By doing this, you may reduce or eliminate tax for the deceased. This is possible because you can claim certain amounts more than once, split them between returns, or claim them against specific kinds of income.

The three optional returns available for a deceased

1) Return for rights or things 

Rights or things are amounts that had not been paid to the deceased at the time of his or her death and would have been included in his or her income when received had the person not died. The main rights or things are from employment and other sources

  • employment income (salaries, commissions, vacation pay) owing by the employer but not payable at the time of death for a pay period that ended before the date of death, as well as retroactive payments paid pursuant to a collective agreement signed before the date of death;
  • uncashed matured bond coupons;
  • accumulated unpaid bond interest;
  • unpaid dividends declared before the person died;
  • OAS, EI and CPP benefits not yet received for a period ended before the date of death or for the month of death;
  • work-in-progress if the deceased carried on a business and had elected to exclude work-in-progress when calculating income;
  • retroactive payment of a disability annuity or EI benefit paid after the date of death, but to which the deceased was entitled prior to that date; and
  • pension plan, RRSP or RRIF payments for the month of death that had not been received at the date of death.

If you elect to file an optional return, all rights and things have to be reported therein except those transferred to beneficiaries. Rights or things transferred to a beneficiary before the filing deadline for an optional return have to be reported by the beneficiary

2) Return for a partner or proprietor 

A deceased person may have been a partner in, or the sole proprietor of, a business. The business may have a fiscal year that does not start or end on the same dates as the calendar year. If the person died after the end of the business’s fiscal period but before the end of the calendar year in which the fiscal period ended, you can file an optional return for the deceased.

If you choose not to file this optional return, report all business income on the Final return.

3) Return for income from a testamentary trust 

You can file an optional return for a deceased person who received income from a testamentary trust. The trust may have a fiscal period (tax year) that does not start or end on the same dates as the calendar year. If the person died after the end of the fiscal period of the trust, but before the end of the calendar year in which the fiscal period ended, you can file an optional return for the deceased.

Note: Do not confuse this optional return for income from a testamentary trust with the ‘T3 Trust Income Tax and Information Return’.  After someone dies, a will or a court order may create a trust, and the trustee, executor, or administrator may be required to file a T3 return.

Contact us for more information on optional returns.

To see a good summary on all types of returns and what type of income, deductions, and credits must be claimed on each return, visit the CRA’s link below.

http://www.cra-arc.gc.ca/tx/ndvdls/lf-vnts/dth/chrt1-eng.html#tbl2

 

 

2016 Income Tax Deadlines

Important dates for 2016 (Individuals)

2016 Income Tax Deadline

2016 Income Tax Deadline

Individuals should make note of the below key dates impacting 2016 tax season:

2016 Income Tax Deadlines

Generally, your return for 2015 has to be filed on or before April 30, 2016. Since April 30, 2016 falls on a Saturday, individuals have until Monday May 2, 2016 to file.

Balance owing

Your balance is due no later than April 30, 2016. When a due date falls on a Saturday, a Sunday, or a holiday recognized by the CRA, your payment is considered to be made on time if it is received or it is postmarked on the next business day.

Registered Retirement Savings Plan (RRSP)

Deadline to contribute to an RRSP for the 2015 tax year is February 29, 2016.

GST/HST credit payments

If you qualify for GST/HST credit, the payments are generally issued on the 5th day of each quarter.

  • GST/HST credit payment dates
    • July 3, 2015
    • October 5, 2015
    • January 5, 2016
    • April 3, 2016
RESP contributions, 2016 charitable contributions and 2016 TFSA contributions

Deadline for RESP contributions, 2016 charitable contributions and 2016 TFSA contributions is December 31, 2016.


For more dates and other information visit the CRA website. For more information on the above dates that may impact you, contact Cheema CPA Professional Corporation. We are a Brampton and Mississauga based accounting firm. We can help you prepare your 2015 income taxes. Contact us for all your 2015 income tax and accounting needs. 


 

Canada Revenue Agency (CRA) HST Audit

Canada Revenue Agency (CRA) HST Audit

CRA HST Audit

CRA HST Audit

Canada Revenue Agency CRA HST Audit

The Canada Revenue Agency (CRA) frequently conducts HST audits and reviews to make sure Canadians are complying with the regulations. CRA HST Audits can also be referred to as GST Audits or GST/HST Audits. GST/HST audits focus on GST/HST filing errors and omissions. The CRA does have the right to examine records of the organization that are relevant to determining its tax liabilities.

What causes a CRA HST audit?

The CRA has a complex computer system that allows it to select returns to be audited by sorting them into various groups. There are four common ways the CRA selects files for audit:

  1. Computer-generated lists – In order to select specific returns for audit, the CRA often compares selected financial information for current and previous years of taxpayers engaged in similar businesses or occupations.
  2. Audit projects – The CRA often tests the compliance of a particular group of taxpayers, particularly if there is reason to believe that there is significant non-compliance within a group.
  3. Leads – Leads for audits often are the result of other audits or investigations, as well as information from outside sources.
  4. Secondary files – A business may be selected for audit if it is associated with another file that is being reviewed for audit, since the CRA often finds it convenient to look at all the records at the same time.

What is the CRA’s new approach?

The way the CRA conducts its audits has changed over the years. The CRA has switched from a combined audit approach to a detailed approach. In the past, most audits of smaller businesses have been done as combined audits – one audit covering both income tax and GST/HST. Combined audits have now been discontinued. Therefore, businesses are now subject to an income tax or GST/HST audit, leading the CRA to request more detailed information.

What can you do to prepare for a CRA HST audit?

Before you release any information to the CRA, make sure you seek professional advice. Once the information has been released the CRA can use it against you to assess penalties and interest. This requires you to be well prepared and know your rights as a business owner. In case of an audit remember the following:

  • Maintain good records: Organize the receipts and documentation to support your claims. You are required to keep your records and supporting documents and financial information for at least six years. Well-kept records will likely reduce the time required to complete the audit. some tips on good record keeping include:
    • Ensure you have copies of any GST/HST elections you have been relying on.
    • Ensure your documentation is neatly organized and in order. The CRA will likely request a copy of your electronic books and records.
    • If you have a combination of exempt and taxable supplies, ensure your ITC allocation methodology is documented and explained.
  • Be knowledgeable: Before the auditor begins the audit, confirm what taxation years are under review and what records he or she will require. This will ensure you have the required information ready for the auditor upon arrival.
  • Know your rights: Don’t give the auditor full accessibility to your files. Understand your rights as a taxpayer and exercise them when necessary.
  • Understand the information you are providing: Carefully review all information provided to the CRA and ensure that you are not providing more information than required.
  • Be courteous and professional: It is important to cooperate with the CRA and provide them with the information they request. However, always remember your rights as a business owner. Responding promptly and professionally to all correspondence received from the CRA may help complete the process faster and smoother.

A CRA audit can be time consuming and costly when you don’t have the right resources. For assistance, contact Cheema CPA Prof. Corp. and we will work with you through this process.

What are your rights GST/HST CRA audit?

Your rights are outlined in the Taxpayer Bill of Rights, which states the 16 rights that apply to all taxpayers and registrants. This video, will mention three of the 16 rights that we want to highlight for you as you go through the audit process.

 

  • Right number three says you have the right to privacy and confidentiality. Auditors must respect the confidentiality of tax information and are obliged to take safeguards to protect your information.
  • Right number five says you have the right to be treated professionally, courteously, and fairly. You should expect this treatment from an auditor.
  • And right number six says you have the right to complete, accurate, clear, and timely information. You should expect to be kept informed throughout the audit.

If you need to learn more about your rights as a taxpayer please refer to the Taxpayer Bill of Rights. 

Who can help during a GST/HST CRA audit?

Having the right team of professionals handling your HST audit is the key to success. As a taxpayer and a business owner you have rights. Before you release any information to the CRA make sure you seek professional advice. Once the information has been released, the CRA can use it against you to assess penalties and interest. Our firm is specialized in CRA HST Audits and Reviews. We can help you achieve a favorable result. Our team of lawyers and tax accountants can professionally handle your CRA HST Audit or Review.

Brampton Accountant: 2015 Income Tax Checklist

Brampton Accountant: 2015 Income Tax Checklist

Brampton Accountant: 2015 Income Tax Checklist. Cheema CPA Professional Corporation is a Chartered Professional Accountant firm located in Brampton, Ontario. We provide professional tax and accounting services. Each year we put together a checklist to help our clients assemble all the information required for personal taxes. This checklist will help you get more organized and help us minimize your taxes. To download: Tax Checklist.

General Items

  • A copy of last year’s return
  • 2009 Notice of Assessment
  • Other years reassessments
  • Details of changes to your personal status such as dates of marriage, separation, divorce or widowed, births and deaths
  • Note consenting to provide your income tax information to Elections Canada
  • Installment payments
  • Details of foreign property holdings (if any*) including cost of property held

Income

  • Universal child care benefit (RC62)
  • Employment income (T4)
  • Pension income (T4A, T4A(P), T4RIF, T4RSP)
  • US social security
  • Old age security (T4OAS)
  • Investment income (T5)
  • Income from trusts such as mutual fund investments (T3)
  • Income from employment insurance (T4E)
  • Income from partnerships (T5013)
  • Workers compensation/social assistance payments (T5007)
  • Details of the sale of securities such as stocks and bonds (eg. trading summary from your broker)
  • Income from foreign investments
  • Spousal support payments received

Deductions General

  • RRSP contributions
  • Medical, dental, prescription drugs, nursing home expenses
  • Payments to a private health insurance plan
  • Charitable donations
  • Tuition fees/education amount (T2202A) for yourself or transferred from a dependent such as a child or grandchild
  • Interest paid on student loans c Professional dues, union dues c Public transit passes
  • Childrens participation in programs related to physical activity
  • Interest on loans assumed to purchase investments
  • Safety deposit box fees
  • Professional consultant fees
  • Legal fees paid to establish child or spousal support or to enforce a pre-existing agreement
  • Legal fees paid to recover wages from your employer
  • Details of people you support and their medical status
  • Child care receipts (for camp, list dates attended)
  • Moving expenses if you moved 40km or closer to work or school
  • Property taxes or residential rent paid and to whom
  • Political contributions receipts
  • Disability tax credit claim form completed by authorized health practitioner (T2201)
  • Spousal support payments paid
  • Adoption expenses

Deductions Employees

  • Declaration of conditions of employment form (T2200)
  • Details of expenses not reimbursed by your employer including travel expenses (eg. parking, taxis, bus fare), supplies and assistant salaries
  • Office rent if required as a condition of employment
  • Home office expenses if it is your principal workplace or used exclusively, on
  • a regular or continuous basis for activities such as business-related meetings; include details of rent paid, repairs and maintenance costs, utilities and if you are
  • a commissioned salesperson also property taxes and home insurance. Also indicate the total area of your home and the area used for your work-space
  • If you are a commissioned sales-person, details supporting advertising expenses, promotion, meals and entertainment
  • Motor vehicle expenses

Deductions Motor Vehicles

  • Total kilometers driven and kilometers driven just for work
  • Details of total expenses incurred for gas, maintenance and repairs, insurance, license and registration, loan interest and lease payments
  • New vehicle, purchase invoice/agreement

Unincorporated Businesses

  • Total sales revenue for the year
  • Total expenses listed by category for the year
  • Capital assets acquired (eg. computers and peripherals, furniture and equipment)
  • Home office expenses include details of rent paid or if you own your home, details of repairs and maintenance, utilities, property taxes, insurance, mortgage interest
  • Motor vehicle expenses

Unincorporated Businesses

  • Total sales revenue for the year
  • Total expenses listed by category for the year
  • Capital assets acquired (eg. computers and peripherals, furniture and equipment)
  • Home office expenses include details of rent paid or if you own your home, details of repairs and maintenance, utilities, property taxes, insurance, mortgage interest
  • Motor vehicle expenses

Download (PDF, 30KB)

2015 INCOME TAX

2015 INCOME TAX

 

Personal Tax Changes 2016 Tax Season

Personal Tax Changes 2016 Tax Season

Personal Tax Changes for 2016 Tax Season

Personal Tax Changes for 2016 Tax Season

Changes and Updates for 2016 Tax season

We will discuss the personal tax changes 2016 tax season in this article. Following key changes to existing services, credits, and amounts impact individual taxpayers in the 2016 tax-filing season:

  • Updated notice of assessment – The Canada Revenue Agency (CRA) has updated the format of the notice of assessment to be simpler. Taxpayers can now find the most important information about the assessment on the first page.
  • Universal child care benefit (UCCB) – For the 2015 tax year, the UCCB was expanded to children aged 6 through 17. Also, payments that parents receive for children under the age of 6 increased to $160 per month for each child. To learn more about the UCCB read our full blog post here. This Personal Tax Changes 2016 Tax Season was implemented before 2016.
  • Disability Tax Credit – This year, Canadians claiming the Disability Tax Credit (DTC) will be able to file their T1 return online regardless of whether or not their Form T2201, Disability Tax Credit Certificate has been submitted to the CRA for that tax year.
  • Children’s fitness amount – As of January 1, 2015, this is now a refundable tax credit available to families with children enrolled in a prescribed program of physical activity. For tax years prior to 2015, this credit was non-refundable. The Children’s Fitness Tax Credit allows you to claim eligible fees paid in the year up to a maximum of $500 per child (an additional amount of $500 is available if the child is eligible for the Disability Tax Credit and a minimum of $100 has been paid for eligible fees in the year). The child must have been under 16 years of age (or under 18 years of age if eligible for the disability tax credit) at the beginning of the year in which an eligible fitness expense was paid.
  • Child Care Expense Deduction limits – As of the 2015 tax year, the Child Care Expense Deduction dollar limits have increased by $1,000. The maximum amounts that can be claimed have increased to $8,000 for children under age seven, to $5,000 for children aged seven through 16, and to $11,000 for children who are eligible for the Disability Tax Credit.

For more information on the above key changes that may impact you, contact Cheema CPA Professional Corporation. Cheema CPA can help you understand personal tax changes 2016 tax season.  Visit the CRA website for more personal tax changes and updates 2016 tax season.