Helping Seniors: 10% Fail to Receive GIS

According to Statistics Canada*in 2016, 4.9% or 289,000 of 4.9 million seniors in Canada were living in poverty. Yet, more than one in ten seniors who are eligible for the Guaranteed Income Supplement (GIS) didn’t receive it in 2016-17. This is a big concern because, in fact, the number of seniors living in poverty is on the rise. So what’s the problem?

The Guaranteed Income Supplement (GIS) is designed to assist low-income seniors. Unfortunately, the government says many low-income seniors who could use the extra cash often don’t apply for GIS because they think they earn too much, or don’t understand the process.

The current process is that seniors who are automatically selected to receive Old Age Security are also automatically selected to receive the GIS based on their income, as reported on their last income tax return. But here is one of the problems – not all seniors file or file a return on time.

Once enrolled, seniors continue to receive the GIS so long as they file a tax return and report sufficiently low income. But, those income levels fluctuate and the eligibility ranges are not well known. They also depend on the taxpayer’s family status as shown in the table below.

The Basics on Eligibility.  The allowance is available to low-income seniors aged 60 to 64 who are married to a pensioner or are the surviving spouse of a senior. These figures are for January to March 2019 and are indexed quarterly.

Family Situation Maximum Income
(excluding OAS)
Maximum
Amount
Reduction
Rate*
Single, widowed, or divorced senior $18,240* $898.32 $1/$24
Spouse receives full OAS $24,096* $540.77 $1/$48
Spouse does not receive OAS $43,728* $898.32 $1/$96 over $4,096
Spouse receives the Allowance $43,728* $540.77 $1/$48

* Benefit reduced by one dollar or each multiple of income level shown (e.g. $1 for each $24 of income for a single senior). Note that the first $3,500 of employment income does not count.

** combined income of both spouses


Less Common GIS Situations:

  • Retiring seniors – seniors who are about to retire and anticipate a lower income in their first year of retirement may apply for the GIS based on their estimated income after their retirement date. This occurs even if they do not qualify based on income reported on their last tax return.
  • Death of a spouse – when a taxpayer’s spouse dies, their GIS is based on their own income for the year of death rather than their family income (as it was for years when they were married at the end of the year). However, even if this income level is very low, they will not automatically receive the GIS based on their income unless they apply for it.
  • RRSP meltdown – when the taxpayer reaches age 72, any RRSP balances have to be transferred to an RRIF and there are minimum withdrawal amounts annually from the RRIF. For low-income seniors, the minimum withdrawal reduces their GIS each year. 

Seniors anticipating low income in retirement and who have small RRSP balances, transfer the RRSP balance to the TFSA before they are eligible for the GIS so withdrawals can be made without affecting the GIS.

More wrinkles:  For those who are not automatically enrolled or who do not qualify based on income reported on their last tax return, an application is required. Over the coming weeks, the government will be sending out tens of thousands of letters to seniors who are receiving OAS to remind them to apply, but there is no reminder for GIS. Those that meet the eligibility criteria outlined above are encouraged to apply. 

A role for advisors. Tax and financial advisors can help by encouraging their clients to know and understand income ranges that qualify for the GIS and to complete the application forms for seniors as a public service.

Written in collaboration with Walter Harder.

Getting the New Climate Action Incentive Rebate Right

Canada now has anationwide standard for reducing carbonpollution, which means that starting in 2019, a federal “backstop” carbon pollution pricing system will apply to four provinces – Saskatchewan, Manitoba, Ontario and New Brunswick – that have not implemented their own systems. For taxpayers in these provinces, a new refundable tax rebate will be claimed on the 2018 tax return. But, like most tax provisions, it has its wrinkles.

The majority of the charges collected from a fuel tax that begins on April 1, 2019, will be returned through this rebate, called the Climate Action Incentive payments. The amounts being returned to individuals and families are calculated as follows:

PROVINCE
TAXPAYER SPOUSE/ELIGIBLE DEPENDANT QUALIFIED DEPENDANT
SK $305 $152 $76
MB $170 $85 $42
ON $154 $77 $38
NB $128 $64 $32

Payments in Subsequent Years. Climate Action Incentive payments will increase annually as fuel charges rise, until at least 2022. The exact payment amounts are to be announced annually, but for the time being are projected to be as follows:

 Saskatchewan 2020 2021 2022
First adult $452 $596 $731
Spouse $225 $297 $364
Child $113 $148 $182
Family of four $903 $1,189 $1,459


 Manitoba 2020 2021 2022
First adult $250 $328 $402
Spouse $125 $164 $201
Child $62 $81 $99
Family of four $499 $654 $801


 New Brunswick 2020 2021 2022
First adult $189 $247 $303
Spouse $94 $124 $152
Child $47 $62 $76
Family of Four $377 $495 $607


 Ontario 2020 2021 2022
First adult $226 $295 $360
Spouse $113 $147 $180
Child $56 $73 $89
Family of four $451 $588 $718

Supplement for Residents of Rural and Small Communities. In recognition of increased energy needs and reduced access to alternative transportation options, residents of rural and small communities will have their payments increased by 10 percent. To find out which areas will qualify, go to this link:

There, you should be able to find the places outside of metropolitan areas that may qualify, according to CE Summit delegate Dianne Lepage of Liberty Tax Service. She tells us that some towns don’t show up per se, but their rural municipality does. For example, Rapid City, Manitoba, is not there but the rural municipality of Oakview is. It will, in other words, take some digging to find out exactly who qualifies to get the extra payment.

Following are other criteria for the program shared by Finance Canada:

Relief for Farmers. Upfront relief from the fuel charge will be provided with exemption certificates when certain conditions are met. Specifically, a registered distributor can deliver, without the fuel charge applying, gasoline or light fuel oil (e.g., diesel), if the fuel is for use exclusively in the operation of eligible farming machinery and all, or substantially all, of the fuel is for use in the course of eligible farming activities. Farmers do not need to be registered for the purposes of this relief.

Eligible farming machinery means property that is primarily used for the purposes of farming and that is a farm truck or tractor, a vehicle not licensed to be operated on a public road, or an industrial machine or stationary or portable engine. Diversion rules to ensure that the fuel charge applies if gasoline or light fuel oil is not used as intended.

Relief for Fishers. Similar rules apply to fishers when all, or substantially all, of the fuel is for use in the course of eligible fishing activities and when certain conditions are met, one of them being that the province be prescribed for the purposed of the relief. There are currently no listed provinces that are prescribed.

Exemptions to Carbon Taxes. A full exemption from carbon pollution pricing will be granted to: diesel-fired electricity generation in remote communities, for aviation fuel in the territories, and for farmers and fishers. Partial relief from the fuel charge would also be provided for eligible commercial greenhouse operators.

Bottom line: Remind all taxpayers in these provinces to file a tax return – whether they have income or not. It will lead to a bigger tax refund!

The Tax Refund: Friend or Foe to Wealth Management?

The Statistics Canada’s Individual Income Tax Report*released on January 8, highlighted just how much Canadians are being over-taxed by the CRA. With average tax refunds coming in at $1,757 for the 2018 filing season, many taxpayers are effectively providing the government with interest-free loans of approximately $150 per month for up to 16 months before they see their refund. Just how much is that really costing you?

Consider this: $150 a month could help you take advantage of investment opportunities or pay down debt. Investing the money in a TFSA at a 5% return would earn almost $50 in interest over a 12-month period. While that may not sound like much annually, it’s significant over the long-term if that investment is allowed to grow. The earnings are tax-free along the way and when they are withdrawn, too. 

If the money was put into an RRSP, almost immediate tax savings would result, at the taxpayer’s marginal tax rates, provided the taxpayer is age-eligible and has RRSP contribution room.  A spousal RRSP opportunity may also be possible. This opportunity brings with it the possibility of reducing withholding taxes throughout the year, using Form T1213.

Likewise, if taxpayers used that $150 monthly payment to reduce debt — particularly high-interest consumer debt — instead of giving it up to the CRA in overpayment, that could make a significant financial impact. Especially when you consider that the average interest rate for credit cards in Canada is 19%, and that number continues to rise. The benefit is exponentially positive, given that interest on consumer debt is not deductible.

Many Canadians celebrate their refund cheque as though it’s free money when, in reality, money collected through over-taxation should have been theirs all along. Lacking access to it therefore has a negative impact on their financial future – making the tax refund a foe, not a friend, to financial planning goals.

To prevent these repercussions seek out the services of a certified professional in tax-efficient debt management  or a Real Wealth Manager, who can help you coordinate financial plans with tax filing priorities. It’s important to reduce CRA’s reach up-front, and control whether the correct amount of tax is being paid on a regular basis.

Consider the following implementation tips:

  • Fill out a TD1 for your employer’s payroll department, outlining tax credits and deductions you’re likely to claim. Payroll deductions can be adjusted accordingly. This often needs to be requested, as most companies don’t routinely provide these forms to new hires.
  • Update your employer on significant life changes that may impact the amount of tax to be withheld (child or spouse no longer a dependent, for example).
  • Inform your employer if you have more than one employer in the same tax year. This could affect your tax-exempt basic personal amount. Otherwise, if a new employer assumes this applies, under-taxation could occur and you’ll owe money you weren’t anticipating.
  • CRA can give approval to an employer to collect less tax in cases where employees are making RRSP contributions or claiming significant childcare costs, for example. An advisor can help you make the right moves in order to ensure only the necessary taxes are being withheld.

Advisors helping taxpayers through this process can do more than simply manage the logistics; having conversations around this issue creates an opportunity for education. It’s time to start moving the needle and help Canadians better understand the complex tax issues that impact their wealth.

The Statistics Canada Individual Income Tax Report*

What Else Is New in 2019? Auto Expense Deduction Changes

Did you check your odometer reading at the start of the year? Finance Canada confirmed its 2019 auto expense rates on December 27, but they don’t quite measure up to cover the carbon taxes that increase the cost of driving, including the increased gas prices as of January 1. Those who use passenger vehicles for business will be disappointed that their write-offs haven’t changed at all, unless a new vehicle was purchased after November 20, 2018.

Here are the tax changes:

Employer-owned cars. For those who use an employer-provided vehicle, the prescribed rate that determines the taxable benefit for the personal portion of operating expenses paid by employers will be increased to 28 cents per kilometer from 26 cents. For those employed principally in selling or leasing cars, the rate goes up to 25 cents; also a 2-cent-per-kilometer increase. However, that’s not all in terms of costs to employees with this benefit: a standby charge must be computed separately to reflect the fact that the car is available for personal use.

Employee-owned cars. For those who purchase a passenger vehicle, limits on the claims for capital cost allowance, interest costs and leasing costs will not be changed from 2018 limits. The amounts are $30,000 (plus taxes), $300 a month and $800 a month (plus taxes), respectively.

Tax-exempt allowances. The limit on tax-exempt allowances paid to employees who use their own vehicles for business purposes will increase by 3 cents to 58 cents per kilometer for the first 5,000 kilometres driven, and then to 52 cents for each additional kilometer. Those living in the Northwest Territories, Nunavut and Yukon will add 4 cents to this, making it 62 cents per kilometer for the first 5,000 kilometres, and 56 cents there over that distance.

Given that these allowances are intended to offset the costs of owning and operating the vehicle — including fuel, financing, insurance, maintenance and depreciation — the new rates may not be enough to cover the carbon taxes of 4.4 cents starting April 1 for provinces that do not have their own carbon tax regime; and that amount will be even more in other provinces that do.

Average gas prices. It turns out Manitoba has the lowest average gas prices in the country these days, according to the CAA website. As of January 2, the rates were as follows:

Province Gas Price per Litre ($)
Alberta 091.1
British Columbia 125.8
Manitoba 088.7
New Brunswick 101.6
Newfoundland and Labrador 108.5
Nova Scotia 096.1
Ontario 097.6
Prince Edward Island 095.7
Quebec 108.4
Saskatchewan 096.0

Get Ready for 2019: Six Great Tax Moves and Audit-Busters

These tax tips have been excerpted from Evelyn Jacks’ Essential Tax Facts: How to Make the Right Moves and Be Audit-Proof, Too,which has been fully updated with the information your clients need to know when filing their 2018 taxes. It’s not too late to give Canadians the gift of financial literacy this holiday season – and shipping is free!

 Game-Day Tax Strategies

  1. Be sure to adjust your prior filed returns for errors or omissions before the end of the year, especially if you suspect CRA owes you money. Remember, the 2008 tax year is statute-barredas of January 1 so you’ll leave money on the table forever if you miss this opportunity. 
  2. Plan your income sources: Earning a variety of different income sources with different tax attributes can help you to “average down” the taxes you pay. 
  3. Time your income receipts. Before you pull out that extra $5000 from your RRIF to surprise your spouse with a vacation for Christmas, consider doing so in January instead. This tactic will postpone income taxation until the 2019 tax year. Do the opposite if income will be higher next year.
  4. Don’t skimp on your RRSP contribution: An RRSP contribution will increase your tax credits and your after-tax cash flow,too, because it will help you reduce clawbacks of important social benefits you’ll receive all year long.
  5. Top up your RESP contributions: It’s a gift that will generate a Canada Education Savings Grant for you, which will embellish on education savings opportunities for your family.
  6. File family tax returns together: Because many credits are based on “family” rather than “individual” net income, you and your spouse need to file tax returns together. It’s a smart start to the new year to focus on family tax planning. Hunting down and organizing receipts early can really help, to avoid the annual tax filing panic. Spend some time getting organized over the holidays if you can.

Tax Tools of the Trade

  • Own a private corporation? File a T2corporate tax return and pay attention to the new Tax on Split Income rules for adults starting in 2018. As well, inquire about the new rules regarding passive investment income in a private corporation, which begin January 1, 2019.
  • Sold or transferred your home? Form T2019 Designation of a Property as a Principal Residence will need to be filed. It’s complicated, so be sure to solicit some professional help with this.
  • Leaving Canada for good? List reportable properties with your final T1 return: T1161 List of Properties by an Emigrant of Canada. You may have a departure tax, so get some experienced professional help.

Your Audit-Buster Checklist

  1. Get organized: Keep meticulous tax records—in order—all year long to save time and money on filing your audit-proof tax return. This is your first defence in the tax filing requirement.
  2. Preserve your appeal rights: Take note of the date on your Notice of Assessment or Reassessment—CRA’s response to your tax filing. This is used to determine your further appeal rights. Keep a hard copy of this form with your permanent tax records.
  3. Globetrotters: A departure tax is payable if you leave Canada permanently, but it’s reversible if you change your mind. Keep all your tax records.
  4. Investors: Understand the different definitions of income—both active and passive—and the power that CRA auditors have to challenge their tax attributes.On an audit, you may need to prove why an investment should be considered passive rather than active in nature, to save tax dollars.
  5. Beware of the potential for income recharacterization: CRA can consider a single transaction or a series of transactions to be business income (100percent taxable), although you filed them as a capital transaction (50 percent taxable). The burden of proof is on you to convince CRA why you are right. Keep detailed records about the reasons for the transaction, its relationship to your regular line of work and other criteria set out by CRA in its Interpretation Bulletin 459.

Educate Your Clients: Six Essential Tax Tips for 2019

Share the gift of education with your clients this holiday season! By discussing the six essential tax tips your clients need to know for 2019 and beyond, you can help Canadians become more informed on the tax-efficient decisions that will improve their financial health in the new year.

KBR’s top tax tips have been excerpted from Essential Tax Facts: How to Make the Right Moves and Be Audit-Proof, Too,which has been fully updated with the information your clients need to know when filing their 2018 taxes. Author Evelyn Jacks says, “It’s the obligation of every taxpayer to know and follow the tax rules, and keep records to back up claims. These Essential Tax Facts have been written to empower Canadians in their often frustrating relationships with CRA—which are for life, by the way—so that they can keep more of their hard-earned dollars working for their financial future.”

Share these tax tips with your clients to help you make the right tax moves for their households and be audit-proof, too. The complete book also makes a great Christmas gift.”

  1. All taxpayers should file by April 30. The filing due date is April 30 for individual returns and June 15 for those who file returns to report sole-proprietorship income or expenses. However, if proprietors owe money to the CRA, the interest clock starts ticking the day after the April 30 tax filing due date, just like for other taxpayers.
  • It pays to have a tax pro. The burden of proof for the numbers on your return is always on you, even if CRA has made a mistake; therefore, it is important to establish a relationship with a competent professional you can call on, should you have sudden trouble with the CRA. More common, your tax pro can help you with administrative issues that hold up your tax refunds, adjustment requests or to prepare for a tax audit. 
  • Do a “tax-360.” Most people are not aware of their “carry-over” opportunities; that is, the potential to use certain tax provisions in previous or future tax returns to offset taxes payable. Be sure to review past returns and take future tax planning into account rather than focusing on only the year at hand.
  • Selling a tax-exempt principal residence? You will need to know about a new requirement when you file your T1 tax return: you must file Form T2091 Designation of Property as a Principal Residence by an Individual to report that principal residence disposition starting in 2017. Failing to do so can attract a penalty of up to $8000.
  • Claim foreign tax credits. Where income is taxed in more than one country, tax treaties ensure that credit is given in the country of residence for taxes paid to the foreign jurisdiction. If you were subject to taxes in a foreign country, be sure to claim a foreign tax credit on your Canadian return.
  • Departure taxes. Emigrants from Canada must file a “final return” to which a departure tax will be applied to the capital gains resulting from any increase in value of taxable assets, as of the date of departure. This is reversible if you decide to return to Canada in the future, so keep all your records.

Shopping Spoiler Alert: Canadians Aren’t Saving Enough

In the holiday spirit yet? This news might dampen it: on Friday November 30, Statistics Canada released a report on GDP, income and expenditure for the third quarter of 2018. The big news? In 2018, Canadians have had the worst household savings rate on an annual basis since 2005, averaging only 1.4% over the past year. For the third quarter of this year, the household savings rate was a mere 0.8%; the lowest quarterly level since early in 2017.

There are broad repercussions for everyone that come with the lower household savings rates outlined in the Statistics Canada report, specifically, the impact on economic growth that is driven by consumer spending. But even more concerning are the implications to young Canadian families and their ability to financially manage an emergency situation or unexpected expense.

In fact, an October a report by the Financial Planning Standards Council indicated that 33% would fail a “financial stress test,” and face hardship should a significant unexpected expense arise. An Ipsos report from one year prior said than an unexpected expense of as little as $200 could create this situation for more than half of Canadians. Plus, they are struggling to pay down debt, too — 20% rarely (if ever) pay off their credit card balance at the end of the month.

Worse still, 31% of Canadians agree that rising interest rates push them closer to bankruptcy, and this doesn’t bode well for retirement planning. This was further highlighted in the Financial Planning Standards Council survey, which reported that 64% don’t have access to an employee savings program, and six in ten rarely maximize their annual RRSP contribution amounts.

 The money moral? As the household savings rate in Canada hits its lowest point in over a decade, and the forecast is for Canadians to have even less disposable income in the future, debt management and tax-efficient income strategies become more important than ever. it’s prudent to take them into account before the holiday shopping season!

Donation Controversy: Tax Relief for Media

Last week’s Fall Economic Statement featured updates to Canada’s economic outlook and corporate tax changes, specifically, the Capital Cost Allowance measures. However, the Finance Minister also proposed a controversial $595 million package to support Canada’s media sector, including tax breaks for those who subscribe to some online media outlets.

Speaking on November 21 to his support for journalism in Canada Morneau said, “We’ve made some investments to ensure that we continue that we have an important free press and to ensure that we have a strong and healthy democracy by protecting the vital role that independent news media play in our democracy and in our communities…”

To that end, the government will be creating an independent panel made up of members of the media, in order to implement these proposed tax-relief provisions:

  • A temporary, non-refundable 15-percent tax credit for qualifying subscribers of eligible digital news media. Dates and eligibility criteria will be determined by the panel.
  • A donations tax credit for contributions to a new category of “qualified donee” for non-profit journalism organizations. This will allow these organizations to issue receipts for donations from both individuals and corporations and open the door for foundations to provide financial support to media.
  • A refundable tax credit for qualifying news organizations that “produce a wide variety of news and information of interest to Canadians.” Specifically, the tax credit will apply to the labour costs associated with producing original content and will be open to both non-profit and for-profit news organizations. An independent panel drawn from the news industry will be established to define eligibility of the measure, which will take effect January 1, 2019.

Opposition critics have expressed concern about these measures and their impact on journalistic independence. Additional concerns relate to the creation of the panel that will define eligibility criteria, expected before the next federal budget in the spring.

The donations credit is also puzzling, considering that the March 22, 2017 federal budget removed the 25% First-Time Donor’s Super Credit, originally introduced to encourage young people to give to charity.  It cited the following reasons in the budget:   “. . .Budget 2017 confirms that the First-Time Donor’s Super Credit will be allowed to expire in 2017 as planned, due to its low take-up, small average amounts donated, and the overall generosity of existing tax assistance for charitable donations.”

It would appear the government has had a change of heart on using the overall generosity of existing tax assistance for charitable donations in the case of journalism.

Fall Economic Statement: Tax Incentives for Corporations

Canada has been in a strong economic position since 2015, but dark clouds are on the horizon as global economic growth has peaked and deficits are expected to grow. This is what Finance Minister Morneau faces as he unveiled his November 21 Fall Economic Report.

Canada’s economic growth has averaged close to 2.5% since the end of 2015 and in the last three years, the unemployment rate has fallen to 5.8%, the lowest level in 40 years, which has brought with it strong wage growth. As a result, budgetary revenues are expected to increase by 4.9% in 2018-2019, and at an average annual rate of 3.8% over the remainder of the forecast period.

Personal income tax revenues, which still are the largest line item for government intake, are projected to increase by 5.4% or $8.3 Billion in 2018-2019, which bring revenues from this source up to $161.9 Billion, rising by 4.3% annually over the rest of the forecast period “reflecting the progressive nature of the income tax system combined with projected real income gains.”

Corporate taxes are projected to increase as well, by $1.7 billion or 3.5% to $49.5 billion in 2018–19. After which they are projected to decline in 2019–20 by 7.6%, as a result of new tax measures introduced with this report. Following this and over the remainder of the projection period, corporate  tax revenues will grow again by an average annual rate of 3.9%.

On the negative side, the Fall Economic Report reveals that real GDP growth has averaged slightly less than 2% since mid-2017, and it is expected to change from a 2.0% real GDP growth rate for 2018-2019. It will drop to 1.8% over the 5-year period in the report, unchanged from the February 27, 2018 budget.

Worse, the GDP inflation rate, which is the broadest measure of economy-wide inflation, has been adjusted upwards from the February budget. This means the level of nominal GDP (the broadest measure of the tax base) will also be $9 billion higher.

On the upside, the government suggests that household spending and business investment in Canada going forward may be stronger than expected. Especially in light of the current tight labour market conditions. But there are many downside risks that still apply.

The U.S. economy could overheat due to recent significant fiscal stimulus. This in turn could induce the Federal Reserve to increase interest rates faster than markets expect. Should that happen, economic activity in the U.S. could also slow, leading to global financial turbulence driven by higher interest rates and a stronger U.S. dollar. Economic protectionism could also dampen global trading activity, which could affect the Canadian economy.

In reading the fine details of the report, there are some disturbing trends. Exports of non-energy goods, which represent roughly two-thirds of Canada’s goods export volumes have continued to perform below expectations, and have remained largely unchanged for more than a decade.

Meanwhile, Canada’s share of goods exports going to emerging economies is the lowest amongst its peers; indicative of our close trading relationship with the U.S. and what the report calls “the intense and growing global competition for growth opportunities abroad.” In short, Canada must step up to serve the growing needs of emerging economies and reduce its reliance on the U.S.

The report also makes a pitch for the oil transportation by pipeline rather than by mail. “Canadian companies are not getting a fair price for their exports. . . . pipeline transportation constraints in Western Canada means that an increasing amount of Canadian oil is being transported by rail, a development (which) has contributed to a higher discount on the Canadian price of crude oil since the end of 2017.”

Canadian crude oil prices are also vulnerable to developments in the U.S., such as increases in U.S. production, and pipeline and refinery shutdowns in the U.S. These have recently contributed to market prices for Western Canada crude oil declining to historic lows, while world benchmark oil prices remain well above those observed in 2016. The result has been a significant loss in income for Canadian oil producers.

It all means that turbulence is ahead for Canadians, who must continue to navigate a continued and challenging global economic environment and its effects on after-tax wealth accumulation.

Visit Knowledge Bureau Report for the Economic, Fiscal and Revenue Outlook for Canada, adjusted from the February 27, 2018 budget. As per the Fall Economic Report, Finance Canada November 21, 2018.

Death in the Family: Executors’ Obligations

Year-end can be a particularly difficult time for those who have lost a loved one during the year.  But it’s important to see a tax specialist when someone in the family dies, to file any tax returns that may be outstanding on time, adjust prior-filed returns, and to claim specific tax benefits that can help to pay for end-of-life costs.

Filing deadlines. The final tax return, also known as the terminal return, must be received by CRA as follows:

  • Death Occurred between January 1 to October 31: File by April 30.
  • Death Occurred between November 1 to December 31: File within six months after date of death (May 1 to June 30). Note, however, that balances due for the surviving spouse, who may file at the same time, must be paid on or before April 30 to avoid interest charges.
  • Death of a Self-employed Person: If death occurred between January 1 and December 15, file by June 15. If death occurred in the period December 16 to December 31, file six months after date of death (June 16 to June 30). Again, balances due for the surviving spouse, who may file at the same time, must be paid on or before April 30 to avoid interest charges.

Adjust Prior Returns for the Deceased: If there are outstanding returns for prior years for the deceased, the due dates above remain the same; however, Taxpayer Relief Provisions may be applied to late returns due within the last 10 years, or to amended returns previously filed in the prior 10 years, and to waive penalties and interest in hardship cases.

 Special Privileges and Relief Options: Executors who are filing final returns may take advantage of two important special privileges for deceased taxpayers that will provide additional relief:

  • Rights and Things Returns: These additional returns can be filed to claim personal amounts in full on each return – terminal and rights or things – and to split between returns and claim other benefits to the best advantage of the taxpayer on each return.
  • Election to Defer Payment: Especially because of the deemed disposition rules for capital assets on the death of a taxpayer, it is possible that a large tax liability can occur on the death of a taxpayer. It is possible to roll over assets on a tax-free basis to a surviving spouse, and to maximize the use of previously unused tax losses. But if the final result of this astute tax filing on death is still a balance due, it is possible to postpone the tax payment until the asset is actually sold and money is received. Security for the amount owning may be posted by filing form T2075 Election to Defer Payment of Income Tax, Under Subsection 159(5) of the Income Tax Act by a Deceased Taxpayer’s Legal Representative or Trustee. Although interest will be charged by the CRA as it waits for its money, this option may provide much-needed relief when high-value, low-liquidity capital assets must be disposed of to pay taxes on deemed disposition.