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Tuesday, April 14, 2015

Uh oh. I didn't file estate tax returns. Now what?

There's nothing like realizing six years after you think an estate is finished that you really should have filed tax returns. Many of us might panic at the thought of bringing the wrath of Canada Revenue Agency down on our heads! A reader recently wrote to me about this situation. Her letter and my response follow:

"I am in a pickle. My husband died 6 years ago without a will. I went to a lawyer who dealt with life insurance, selling the house, dealing with the public trustee, etc. What he didn't do is file the estate taxes. Neither did I. Now I cashed out an RRSP and got a T4RSP for 2009 estate, which I need to pay tax on. How much trouble am I in to file 6 years late? What do I do?"

This is fixable. You need to go to an accountant as soon as possible. Take all of the estate documents with you, as well as any paperwork relating to any estate assets over the last six years, and your own tax information (copies of returns, Notices of Assessment, etc). Ask the accountant to file all of the returns that have not yet been done. You didn't say whether your husband's last return was filed, but if not, that should be done too. Your own return might have to be amended.

You said your husband didn't leave a will, but you did refer to selling real estate, so I assume that you were appointed by the court as administrator of the estate. If so, you can authorize Canada Revenue Agency to release estate information to the accountant so that he/she can check on whether your husband's last return was filed.

There will be penalties and interest on the amount due, because of the late filing. The Canada Revenue Agency webpage has details as to how much those will be. The sooner you get these returns done, the less you will have to pay in penalties and interest. It's also possible to have penalties and interest waived under certain circumstances. Your accountant should be able to tell  you more about that.

There is no reason that the lawyer would have filed the tax returns for the estate. Lawyers are not accountants and should never file tax returns on behalf of a client. Ever. The lawyer's responsibility was to advise you of the requirement to file returns as part of the duties of an executor or administrator. I frequently noticed with my own clients that there is so much information coming from the lawyer at the beginning of an estate that it's overwhelming. Often, telling a client that later on he or she will have to file tax returns gets lost in the avalanche of information. Giving that advice to the client in writing is much more useful to the client. If you check back over your information received from the lawyer, you should (hopefully) find a letter in which the lawyer advised you about the need for filing tax returns.

Since I'm not an accountant, I can't and won't give information that is very detailed. If any accountants are reading this and have additional information or ideas for this reader, please feel free to add a comment.


  1. Thanks for sharing about Uh oh. I didn't file estate tax returns. Now what?.............

    Tax Accountant Mississauga

    1. You're welcome! I'm getting a lot of feedback about this post. People really are looking for reliable Canadian tax information with respect to estates.



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