Payments made after death

Salary, wages, accumulated vacation pay, taxable benefits, and other amounts owed to an employee by their employer, for work done up to the date of the employee’s death, is employment income in the year the amount is paid. This includes any retroactive pay adjustments, when a collective agreement or another authorizing instrument was signed before the date of death.

A payment made to a deceased employee to recognize the employee’s service to the company may qualify as a death benefit. For more information, see Interpretation bulletin IT-508R, Death Benefits. For more information about payroll deductions and reporting a death benefit, see Death benefits. 

CPP contributions

Deduct Canada Pension Plan (CPP) contributions up to and including the last pay in the month in which the employee died. Also, deduct CPP contributions from monies earned before the death of an employee and not yet paid at the time of death. When prorating the maximum CPP contributions for the year, use the number of months up to and including the month of death.

In some cases, the requirements are different for Quebec Pension Plan (QPP) contributions. For more information, see Guide TP-1015.G-V, Guide for Employers: Source Deductions and Contributions, which you can get from Revenu Québec.

Do not deduct CPP contributions from payments you make after an employee died, except for amounts the employee earned and was owed before the date of death.

EI premiums

Do not deduct employment insurance (EI) premiums from monies earned before the death of an employee (such as salary, banked overtime, a bonus, or vacation pay) and not yet paid at the time of death.

Income tax

Deduct income tax from all of the following amounts:

• salary and wages, accumulated vacation pay, taxable benefits, and any other amounts that were earned by and owed to the employee up to the date of death even if they are paid in the year after death
• payments for retroactive adjustments to employment income when a collective agreement or other authorizing instrument has been signed before the date of death

Do not deduct income tax from any of the following amounts:

• salary, wages, or other pay accumulated after the date of death
• payments for retroactive adjustments to employment income when a collective agreement or another authorizing instrument has been signed after the date of death

Reporting

Employment income and retroactive pay adjustments that you pay to a deceased employee, or to the employee’s estate, have to be reported on a T4 slip in the year in which the amounts are paid even if they were earned by or owed to the employee in a different tax year.

Although the deceased employee, or their estate, may not have to include retroactive payments made because of a collective agreement or authorizing instrument that was signed after the employee’s death, you still have to report these payments on the deceased employee’s T4 slip.

Forms and publications

• Guide T4011, Preparing Returns for Deceased Persons
• Interpretation Bulletin IT-210R2, Income of Deceased Persons – Periodic Payments and Investment Tax Credit
• Interpretation Bulletin IT-212R3, Income of Deceased Persons – Rights or Things
• Interpretation Bulletin IT-212R3SR, Special Release: Income of Deceased Persons – Rights or Things