What returns you need to file
On this page
- What you need to know first
- T1 Income Tax and Benefit Return (T1 Return)
- T3 Trust Income Tax and Information Return (T3 Return)
- File a previous year return
- Provincial and territorial tax
What you need to know first
Income and estate information
To get ready to do the taxes for someone who died, you, as their legal representative, will need to determine:
- any sources of income, and if that income was earned before or after the date of death
- any belongings, property, assets and liabilities at the date of death, and if their fair market value increased or decreased since the time they were purchased by the person who died
- if the person who died is entitled to any tax benefits or credits in their final year
You should also check if the person who died had any uncashed cheques from the CRA.
Types of returns
Depending on the situation, you may need to file more than one tax return:
- T1 Income Tax and Benefit Returns
- T3 Trust Income Tax and Information Return for income earned after the date of death that hasn't been paid to beneficiaries
- Previous year returns that were not filed by the person who died
- Provincial and territorial tax
T1 Income Tax and Benefit Return (T1 Return)
As the representative of someone who died, you will need to file a final T1 Income Tax and Benefit Return for the person who died. This return is referred to as the Final Return.
The Final Return is used to report any income and increases in the fair market value of property, investments and belongings up until the date of death, and all credits and deductions the deceased person is entitled to claim. A Final Return must be filed for every person who dies.
In addition, you may be able to reduce or eliminate tax by reporting income from specific sources earned during specific time periods in optional T1 returns.
What return package to use
- T1 Income Tax Package for the year the person died and for the province or territory of residence of the person at the time of death
- If an income tax package is not available for the year the person died, use the return package for the most recent year and write the year you are filing for in the top right corner on page 1
Optional T1 returns
There are up to 3 types of optional T1 returns that you can file in addition to the Final Return. You may only file an optional T1 return if you have income from eligible sources and time periods to report on that return.
You are not required to file any of the optional T1 returns, but doing so may reduce or eliminate tax that you would otherwise have to pay for the person who died. This is possible because you can claim certain credits or deduction amounts more than once, split them between returns, or claim them against specific kinds of income.
If you choose to file an optional T1 return, report all income that is eligible to be included in that particular optional T1 return, instead of on the Final Return.
- Return for Rights or Things
You can only report income that was earned but not received before the individual died. Had the person not died, they would have included the income in their usual T1 Income Tax and Benefit Return. Rights or things do not include capital gains.
What return package to use
- T1 Income Tax Package for the year the person died and for the province or territory of residence of the person at the time of death. Write "70(2)" in the top right corner of page 1 of the return.
Types of eligible income
- Salary, commissions, and vacation pay owed by the employer for a pay period that ended before the date of death and paid after death
- In some cases salary, commissions and vacation pay might not be taxable; refer to chart 3 - Non-taxable amounts in the Guide T4011, Preparing Returns for Deceased Persons
- Retroactive salary adjustments owed by the employer and paid after death
- This does not include some retroactive contract settlements payable after the date of death
- Old Age Security (OAS), Canada Pension Plan/Quebec Pension Plan (CPP/QPP) paid after the date of death for the month of death
- CPP and Employment Insurance (EI) arrears
- Accounts receivable, supplies, and inventory
- Only if the business of the person who died used the cash method
- Can include the inventory of an artist who has elected to value their inventory at nil
- Crops and livestock, including harvested farm crops and livestock that is not part of the basic herd (see archived Interpretation Bulletins IT234, Income of Deceased Persons - Farm Crops, and IT427R, Livestock of Farmers)
- Uncashed matured bond coupons
- Bond interest earned but not received before death and not previously reported in income
- Dividends declared before the date of death, but not received before death
- Work in progress
- If the person who died was a sole proprietor and a professional (accountant, dentist, lawyer [in Quebec an advocate or notary], medical doctor, veterinarian, or chiropractor) who had elected to exclude work in progress when calculating their total income
For more information about rights or things, see archived Interpretation Bulletin IT212R3, Income of Deceased Persons - Rights or Things, and its Special Release.
Example of rights or things
Casey passed away on March 2, 2022. The employment income that Casey received while she was alive must be reported on Casey's Final Return.
On March 12, 2022, Casey's estate received income from her job, which she earned for the week before she died. The income that Casey’s estate received can be reported on either Casey’s Final Return, or an optional Return for Rights or Things.
- Return for a Partner or Proprietor
You may report any income received between the end of the fiscal year of the business and the date of death if the person who died met both of the following criteria:
- The person who died was a sole proprietor or partner
- The end of the fiscal year of the business is not December 31
What return package to use
- T1 Income Tax Package for the year the person died and for the province or territory of residence of the person at the time of death. Write "150(4)" in the top right corner of page 1 of the return.
To determine the business income to be reported on the Final Return and this optional return, follow the instructions in the section "Part 3 – Alternative method – Death of a proprietor" on Form T1139, Reconciliation of 2021 Business Income for Tax Purposes
Example of eligible income for a proprietor
A person who had a business died on May 28, 2022. The end of the fiscal year of the business is March 31.
You have two options when you report the person's 2022 income:
- Option 1: Report the business income from April 1, 2021, to May 28, 2022, on the Final Return
- Option 2: Report the business income on 2 returns:
- Report business income from April 1, 2021, to March 31, 2022, on the Final Return
- Report business income from April 1, 2022, to May 28, 2022, on the optional Return for a Partner or Proprietor
- Return for income from a Graduated Rate Estate
You may report income received by the person who died from a Graduated Rate Estate (GRE) of another person who died (generally the income will be on a T3 slip) between the fiscal year-end of the GRE and the date of death.
What return package to use
- T1 Income Tax Package for the year the person died and for the province or territory of residence of the person at the time of death. Write "104(23)(d)" in the top right corner of page 1 of the return.
Example of income from a GRE
A husband gets income from a testamentary trust with a fiscal year from April 1 to March 31. The trust was formed as a result of his wife's death on March 31, 2021, and designates itself as a GRE of the wife in its return of income for March 31, 2022. The husband died on June 11, 2022.
You have two options when you report the husband's income from the GRE:
- Option 1: Include the husband's income from the GRE from April 1, 2021, to June 11, 2022, on his Final Return
- Option 2: Report the income received from the GRE on two returns:
- Report income from the GRE from April 1, 2021, to March 31, 2022, on the husband's Final Return
- Report income from April 1, 2022 to June 11, 2022, on the optional Return for Income from a Graduated Rate Estate
T3 Trust Income Tax and Information Return (T3 Return)
Generally, when someone has died, their belongings, property, assets and liabilities form their estate.
An estate may continue to earn income such as investment income or receive amounts such as a death benefit from an employer. Generally, a T3 Return is filed if there is any gain realized or payments received by the estate after the death. This means it is possible to have to file both a Final Return and a T3 Return. Income earned by an estate after the date of death is reported for subsequent years until the estate’s property is fully distributed to beneficiaries.
You might not need to file a T3 Return if the only income after death can be reported by a beneficiary. For example, the CPP/QPP death benefit can be reported on the beneficiary's return instead of on a T3 Return.
An estate is considered to be a testamentary trust. Most estates qualify to be treated as a Graduated Rate Estate (GRE) for tax purposes.
What is a Graduated Rate Estate (GRE)
A GRE, of an individual at any time, is the estate that arose on and as a consequence of the individual’s death, if all of the following conditions are met:
- that time is no more than 36 months after the death of the individual
- the estate is at that time a testamentary trust
- the individual’s social insurance number is provided in the estate’s T3 Return for the tax year that includes that time and for each of its earlier tax years that ended after 2015(36 month period after the death of the individual)
- the estate designates itself as the GRE of the individual in its T3 Return
- no other estate designates itself as the graduated rate estate of that individual in a T3 Return for a tax year that ends after 2015
An estate can only be a GRE for up to 36 months following the death of an individual. The estate will cease to be a GRE if it is still in existence at the end of the 36 month period.
Benefits of a GRE
The benefits of a GRE include:
- Income earned by a GRE is taxed at the same graduated tax rates as individual taxpayers
- Under certain conditions, charitable donations made by a GRE after the death or in the will can be claimed in the year the donation is made or any of the following 5 years, or can be carried back to previous GRE tax years, to the deceased's Final Return, or to the deceased's tax year immediately preceding the year of death
File returns for other trusts of the deceased
On the date of death of the following individuals, the particular trust will have a deemed year end:
- The spouse or common-law partner beneficiary of a spousal or common-law partner trust
- The last surviving spouse or common-law partner beneficiary of a joint spousal or common-law partner trust
- The settlor of an alter ego trust
- An individual (other than a trust) who transferred property on a tax-deferred basis to certain types of trusts
The income that is deemed to be recognized by the trust upon the death of the beneficiary must be reported on the T3 Return filed for the deemed year-end of the trust.
Elect to file testamentary spousal or common-law partner trust income in the Final Return
In the case of a testamentary spousal or common-law partner trust, a joint election between the trust and the deceased beneficiary’s Graduated Rate Estate (GRE) can be filed to report the income that is deemed to be recognized upon the death of the beneficiary for the year on the beneficiary’s Final Return. Report this income on the T3 slip issued to the beneficiary. For the joint election to be valid, all of the following requirements must be met:
- The beneficiary was a resident of Canada immediately before death
- The trust is, immediately before death, a testamentary trust that is a post-1971 spousal or common-law partner trust and was created by the will of a taxpayer who died before 2017
- The trust and the beneficiary’s GRE jointly elect in prescribed form
- A copy of the joint election is filed with both the Final Return of the beneficiary and the T3 Return for the deemed year-end of the trust
As the legal representative of the deceased beneficiary, you need to attach to the Final Return the joint election in the form of a letter which contains all of the following information:
- A heading identifying the letter as a subsection 104(13.4) election
- The deceased beneficiary’s T1 and the trust’s T3 account numbers
- The income amount that was allocated in the T3 slip and reported on the Final Return filed for the deceased beneficiary
- The signatures, names and addresses of both the trustee(s) and the executor(s) for the deceased beneficiary
What return form to use
File a previous year return
If a T1 Income Tax and Benefit Return for any tax year before the year of the death was not filed, you must also make sure they are filed.
Provincial and territorial tax
To calculate provincial or territorial tax, except for Quebec residents, use Form 428 in the T1 Income Tax Package for the province or territory where the person who died was living at the time of death. If the person who died was a resident of Quebec during the year of death, you might have to file additional tax returns to the province of Quebec. Refer to Revenue Quebec for provincial filing requirements.
If the person who died had income from a business in more than one province, refer to Form T2203.
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