Personal Finance

Father passed away - hasn't filed income tax in 12 years

  • Last Updated:
  • Feb 18th, 2017 1:12 pm
[OP]
Newbie
Oct 27, 2012
23 posts
29 upvotes
Oshawa

Father passed away - hasn't filed income tax in 12 years

My father recently passed away and I learned he hasn't filed an income tax return in 12 years. Most of these years he received no income aside from OAS and CPP but for a couple of them he was a small business owner. I am currently searching for a good local accountant but I just wanted to get the facts so I am prepared. I also found out that all of the book keeping records for the small business have been destroyed. The income was very little and probably below his personal exemption limit. Is there a statute of limitations on income tax and/or gst? Any tips?
4 replies
Member
Mar 13, 2012
337 posts
93 upvotes
Sarnia
Did your father have a will? Are you the executor named in the will? If so, you need to contact CRA, submit copies of the death certificate and will and ask to be named his official representative. Then the CRA can answer questions about the status of his returns. Of course, you also have to contact Service Canada to have the OAS and CPP payments stopped. Then you can apply for the CPP death benefit (which, by the way, is also taxable).

If there is no will, then it gets more complicated, and you have to apply to the Ontario courts for appointment as your father's representative. I don't think an accountant would be able to help you much before you establish yourself as your father's representative, if that is what you are.
Deal Addict
Feb 25, 2007
1311 posts
776 upvotes
Ottawa
First, condolences on your loss.
Second, did he leave a will? Is it clear who is the executor of his estate? It will be a bit of a schmozzle to sort this out and after his passing, be aware that the person who needs to sort it out is the executor, which may or may not be you. (If the executor is another family member, you may of course help them, but they are the ones responsible and the ones who will need to take steps.)
Third, was the business incorporated? If so, who are the remaining directors/officers of the company? They are the ones responsible for that side of things.

The good news is that one is not in general obligated to file a personal tax return if one does not owe tax. (There are exceptions). So while it will create a hassle, it is not necessarily the case that he has done something *wrong*.

I would personally start off by asking 2 questions:
1. What is the status of the small business. Does it still exist? Does it have any assets to be liquidated/possibility to sell the business? Are there any related liabilities? Was it actually registered for -- and collected -- HST? (You talk about GST liabilities but that feels inconsistent with their being minimal income form the business and only sporadically, though of course possible if there were revenues but also costs)
2. Try to approximately ballpark the amount of taxable income per year, with a particular emphasis on identifying what years, if any, could there reasonably have been any tax payable.

You (resp. the executor) may of course take the position that unfortunately his poor recordkeeping means you need professional help to sort this out, and the cost (accountant, etc) will be borne by the estate and therefore all heirs. However, if the small business is not incorporated, hasn't been active for years and has no assets/liabilities to speak of, and you are confident there is actually no tax owing, then an accountant won't help much and professional advise will only cost money.

One option the executor can probably do (I'm speculating here) is contact the CRA and ask for what filings he did make, and what information slips they have on file for him. This would then lessen the problem to reconstructing the business records at least to sufficient detail to be confident/be able to document no tax is owing, to be able to file a final return on death.
Deal Addict
Jan 28, 2014
3470 posts
678 upvotes
Toronto
kellymisty wrote: Did your father have a will? Are you the executor named in the will? If so, you need to contact CRA, submit copies of the death certificate and will and ask to be named his official representative. Then the CRA can answer questions about the status of his returns. Of course, you also have to contact Service Canada to have the OAS and CPP payments stopped. Then you can apply for the CPP death benefit (which, by the way, is also taxable).

If there is no will, then it gets more complicated, and you have to apply to the Ontario courts for appointment as your father's representative. I don't think an accountant would be able to help you much before you establish yourself as your father's representative, if that is what you are.
Correct. I was in the same situation - although I did not know the woman who had died, she died intestate but as she was married to a direct relation who died while in the process of having a will prepared - so also intestate - the series of events as described by kellymisty must be undertaken to be appointed as an executor for a person dying without a will. This process took several months and also cost at the time about $1,000 - $1,500. An accountant will not help with this. The woman who died had not submitted tax returns for 15 years.

Note that if you are appointed executor - or there was a will and you are named executor you will start receiving notices from the tax department on a regular basis advising that the tax returns are due - and penalties if all of the tax documents are not received by the date levied.

You will also want to get a Clearance Certificate for your father.

There was another major wrinkle in the situation I found myself in but that should not affect your case, unless of course your father received social assistance while having funds in the bank. That would open a whole different can of worms.

But first things first. If there was not a will you will know where to start.
[OP]
Newbie
Oct 27, 2012
23 posts
29 upvotes
Oshawa
Wow. Thanks for all the support!

There is no will and I am working on being appointed executor and his representative. The small business has no assets and he sold the building about 10 years ago and walked away from the business. However, since he didn't do his taxes I am sure he didn't pay any capital gains on the sale so that is what I am most concerned about now. I am sure there will be interest and penalties for the money owing. He sold items at his business so he was required to pay the GST he collected but I am told it is up to date from another family member who was involved at the time. He had no other assets at his time of death aside from a small piece of property that I don't want to loose. I am sure he will owe capital gains on this property as well.

Should I find a tax lawyer and talk about doing a voluntary disclosure?

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