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Double Duty: Executors’ Tax Filing Obligations

If you dread doing your own taxes, then think twice about becoming an executor of an estate. One of the core duties of a personal representative is to deal with the deceased’s taxes. In Alberta, the duty is contained right in the Surrogate Rules, which state that:

Determining the income tax or other tax liability of the deceased and of the estate, filing the necessary returns, paying any tax owing and obtaining income tax or other tax clearance certificates before distributing the estate property.

While there are a myriad of tax issues that may arise in an estate administration, an early and essential part of any estate is the filing of the final tax return or the terminal return. There are some important filing deadlines to keep in mind:

  • If the death occurred between January 1 and October 31 inclusive, the due date for the final return is April 30 of the following year.
  • If the death occurred between November 1 and December 31 inclusive, the due date for the final return is six months after the date of death.

A slight variation applies if the deceased or his or her spouse was carrying on business in the year of death, in which case the final return is due by June 15 of the following year for all deaths between January 1 and December 15, and six months from the date of death for deaths between December 16 and December 31. However, any balance owing must still be paid by April 30 to avoid interest charges.

Canada Revenue Agency will charge a late filing penalty of 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. In the recent Alberta decision in Cormack Estate, the personal representative was held liable for paying back late filing penalties and interest to the Estate on a final passing of accounts, although she was otherwise cleared of any misconduct during her administration of the estate.

If you are a personal representative, you have a duty to deal with the deceased’s taxes in a timely manner. It is worthwhile to get appropriate accounting advice at the start, but keep in mind that you still have a duty to supervise the work of the accountant and the ultimate product. Also, your professional advisors’ work is only as good as the inputs you provide, so it will be necessary to gather the necessary documents and get an idea of the deceased’s tax and financial situation fairly quickly following the death.

If you have questions about the duties of an executor, administrator or a trustee at any point in an estate administration, contact me to discuss.

Thanks for reading and happy tax season to everyone!