Personal Finance

2019 T4A for a person who passed away in 2018

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  • Feb 12th, 2020 8:33 pm
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Newbie
Feb 3, 2020
1 posts

2019 T4A for a person who passed away in 2018

A family member passed away in 2018. In 2019, I filed her last tax return having selected “Filing on behalf of another person” and then “Deceased” option in TurboTax. I had no issues with the process.

Last week, a 2019 T4A tax receipts arrived; it was addressed to her estate (I’m the executor). This is for the defined benefit pension plan that she selected and signed for *prior* to her passing in 2018. She died unexpectedly and never received the money on time. Thanks to bureaucracy and carelessness, the lump sum was not officially paid out until 2019. I tried to use the same process that I used last year to file a tax return for a deceased person, but upon entering the date of death, TurboTax does not proceed any further showing the following error message “The year of death cannot precede the current tax year”. I tried another tax software I found online called "StudioTax", and that program too restricts the year of death to 2019/2020 only.

Additionally, a “Reimbursement Of Benefit Paid During A Previous Year” on a pink slip was delivered. This was addressed directly to her (not the estate), but had my name as “Care Of”. TurboTax help page says that this goes under the “Other Deductions” option.

Getting through to the CRA right now is a nightmare. I’m hoping that you can help me figure out how to deal with this situation. What do I do in this situation?
11 replies
Deal Addict
May 16, 2017
2807 posts
3662 upvotes
Depends what the T4A was for exactly:
- Pension Plan Death Benefit
- Return of contributions
- Something else?

If it was supposed to have been paid out as a direct result of her death it could have been included in her final T1 Return, which means you should be doing an adjustment to that final return you did. If it counts as income after death that would be a T3 return (depends again on how the estate assets have been distributed to those named in the Will).
Deal Guru
Jan 19, 2017
10048 posts
6145 upvotes
Varipet wrote: A family member passed away in 2018. In 2019, I filed her last tax return having selected “Filing on behalf of another person” and then “Deceased” option in TurboTax. I had no issues with the process.

Last week, a 2019 T4A tax receipts arrived; it was addressed to her estate (I’m the executor). This is for the defined benefit pension plan that she selected and signed for *prior* to her passing in 2018. She died unexpectedly and never received the money on time. Thanks to bureaucracy and carelessness, the lump sum was not officially paid out until 2019. I tried to use the same process that I used last year to file a tax return for a deceased person, but upon entering the date of death, TurboTax does not proceed any further showing the following error message “The year of death cannot precede the current tax year”. I tried another tax software I found online called "StudioTax", and that program too restricts the year of death to 2019/2020 only.

Additionally, a “Reimbursement Of Benefit Paid During A Previous Year” on a pink slip was delivered. This was addressed directly to her (not the estate), but had my name as “Care Of”. TurboTax help page says that this goes under the “Other Deductions” option.

Getting through to the CRA right now is a nightmare. I’m hoping that you can help me figure out how to deal with this situation. What do I do in this situation?
If the amt is small, just forget about it. Technically, you don't have to file a return if there is no tax payable. Penalty and interest charges are only applied if there is tax owed.
Deal Guru
Feb 4, 2015
10328 posts
6693 upvotes
Canada, Eh!!
Condolences.

Had to do same for Dad few years back... can't quite remember what happened for income after year of death... file under estate of XYZ reurn?

Start with this if not already read:

https://www.canada.ca/en/revenue-agency ... -2016.html#

This might help for income after final return:

https://www.canada.ca/en/revenue-agency ... eturn.html

Report income earned after the date of death on a T3 Trust Income Tax and Information Return.

Make sure to get clearance certificates.
2022/3: BOC raised 10 times and MCAP raised its prime next day.
2017,2018: BOC raised rates 5 times and MCAP raised its prime next day each time.
2020: BOC dropped rates 3 times and MCAP waited to drop its prime to include all 3 drops.
Deal Addict
May 16, 2017
2807 posts
3662 upvotes
ml88888888 wrote: If the amt is small, just forget about it. Technically, you don't have to file a return if there is no tax payable. Penalty and interest charges are only applied if there is tax owed.
If you don't make the right elections when establishing the Graduated Rate Estate for T3 purposes for the deceased every cent of income could be taxable.

This is either a T1 Adj for the terminal tax return or a T3 for 2019. The other option is for the income amount on the T4A to split amongst the beneficiaries of the Estate directly and for them to claim the income, especially if there are no other assets remaining in Trust and yet to be distributed by the Executor.
Deal Expert
User avatar
Jul 30, 2007
33234 posts
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Toronto
If it is addressed to the Estate, then I believe you should file a T3 tax return
Deal Addict
Feb 22, 2007
2107 posts
300 upvotes
Mississauga
i'm in a similar position

filed the final tax return in 2019 for a deceased in 2018

now CPP sent me a T4A(P) for the death benefit...

made out to the estate of deceased
C/o Me.

I'm thinking to simply include this in my personal tax return
Member
User avatar
Sep 4, 2008
381 posts
273 upvotes
pardnme wrote: i'm in a similar position

filed the final tax return in 2019 for a deceased in 2018

now CPP sent me a T4A(P) for the death benefit...

made out to the estate of deceased
C/o Me.

I'm thinking to simply include this in my personal tax return
I am in this process too at this time for my deceased father. You do not claim the death benefit on the final return of the deceased. I am executor and the T4A(P), as noted above, has my name on it after estate, so it is claimed on my personal income tax for 2019.
I believe to use a T3 return the estate need be a trust or quite complicated, which most are not.
Deal Expert
User avatar
Jul 30, 2007
33234 posts
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Toronto
I did a t3 trust return about 6 yrs ago and it was not difficult to prepare.
Sr. Member
Sep 5, 2017
500 posts
260 upvotes
I have no advice, but I just wanted to say sorry for your loss ❤Broken HeartPensive Face
Deal Addict
May 16, 2017
2807 posts
3662 upvotes
krwilson wrote: I am in this process too at this time for my deceased father. You do not claim the death benefit on the final return of the deceased. I am executor and the T4A(P), as noted above, has my name on it after estate, so it is claimed on my personal income tax for 2019.
I believe to use a T3 return the estate need be a trust or quite complicated, which most are not.
The CPP Death Benefit is taxable, so unless the recipient(s) are in a NIL or low tax bracket less tax will typically be payable using a GRE (Graduated Rate Estate) and filing a T3. While the Executor can claim and pay tax to keep things simple, the death benefit could also be paid out by the Executor to the beneficiaries of the Will or to the person that paid for the funeral and they would claim the death benefit in proportion to the distribution.

After the date of death, all Estates are effectively trusts - just the way the assets are liquidated and paid out and the income generated after death will determine whether a T3 filing is appropriate. Trusts can be quite simple and for the most part, the same calculations of capital gains and income will be the same but will be tax savings in many cases when treated as a GRE.
Member
Feb 9, 2020
201 posts
127 upvotes
Sorry for your loss....

These pension plans would have named beneficiaries. The payouts at the end of the day would go to the beneficiaries, and the beneficiaries would need to report the income and pay the taxes.
I wouldn't count on the issuer for the T4A slip to get this right every time, so I would confirm who the beneficiaries are. If there are no beneficiaries, they would be indeed taxed in the estate (i.e. trust).
Anyways simple steps 1, 2, 3 without getting into details
1. prepare a 2019 T3 return
2. put in the income
3. specify that it's a testamentary trust and you want to elect to have a graduated rate estate (GRE) (i.e you get graduated tax rate like personal tax instead of trusts' usual tax rate which is straight ~51%)
4. the fiscal period would be day after date of death to one year from that date (maximizes your GRE benefits for the 36 month period that it is applicable)
5. file before the deadline (90 days after after end of the fiscal period) Do not file this late otherwise you may lose GRE.
6. pay the taxes

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