Prepare Tax Returns for Someone Who Died — Montreal CPA Firm Near You: Final Returns, Estate T3 Returns, Income Reporting, Credits, and Clearance Certificates

When someone dies, their tax obligations must still be completed. The legal representative—executor, liquidator, or administrator—is responsible for filing the final tax returns, reporting income up to the date of death, reporting estate income afterward, and ensuring that all balances owing are paid before the estate is distributed. This process can involve multiple returns, specialized reporting rules, business closures, and the need for a clearance certificate to protect the representative from personal liability. Many families do not realize how complex this process can be until they confront it during an already stressful time.

This guide provides a comprehensive explanation of which returns must be filed, how to report income and dispositions, what deductions and credits are available, how to file the returns, and what steps must be taken before distributing estate property. Proper compliance ensures the estate is settled correctly and prevents reassessments, delays, or liability for unpaid taxes.

Legal and Regulatory Framework

The Income Tax Act requires a legal representative to file a Final T1 Income Tax and Benefit Return for the deceased person. This return reports all income earned from January 1 of the year of death up to the date of death. In many estates, additional returns may also be required:

• Optional T1 Returns, which apply to specific types of income eligible for separate reporting
• T3 Trust Income Tax and Information Return for income earned by the estate after death
• Business, rental, investment, and capital property reporting
• Final reporting for RRSPs, RRIFs, TFSAs, and deferred gains

The legal representative may claim deductions and credits—such as medical expenses, charitable donations, capital losses, and business expenses—to reduce the amount the deceased or the estate may owe. Certain elections must be filed before the clearance certificate is requested.

Because estates often involve both federal and provincial requirements, Quebec liquidators must also follow Revenu Québec’s procedures for the provincial final return and Quebec trust reporting.

Key Court Decisions

Canadian courts have consistently held that executors have a duty to file accurate and complete tax returns for deceased individuals. The courts have emphasized that failure to file the required returns, or distributing estate assets prematurely, may result in personal liability for unpaid taxes. Rulings also reinforce that income earned after the date of death must be reported on a T3 trust return and not on the final return.

Court decisions involving capital gains, deemed dispositions, RRSP transfers, and valuation disputes highlight the importance of proper tax reporting when settling an estate. Judges have noted that CRA assessments are presumed correct unless the legal representative can demonstrate otherwise through documentation and accurate filings. These decisions underscore the need for professional tax support during estate administration.

Why CRA Targets This Issue

The CRA scrutinizes returns filed after a death because estates may involve complex transactions and multiple income sources. Common issues that trigger CRA reviews include:

• failure to file the final return
• missing T3 Trust Returns
• incorrect reporting of income up to the date of death
• unreported capital gains or deemed dispositions
• missing RRSP or RRIF reporting
• rental or business income not reported
• late filings leading to penalties or interest
• unclear or incomplete documentation
• premature distribution of assets before a clearance certificate

Because estate tax obligations may continue for several years, proper reporting and documentation are essential to avoid reassessments and delays.

Mackisen Strategy

Mackisen guides executors, liquidators, and administrators through every stage of filing tax returns for a deceased person and their estate. Our approach includes:

• determining which returns must be filed
• preparing the Final T1 return
• filing optional T1 returns for eligible income
• filing T3 Trust Income Tax and Information Returns
• reporting investment, business, rental, and pension income
• preparing RRSP, RRIF, TFSA, and capital gains reports
• calculating deemed dispositions at death
• claiming allowable credits and deductions
• organizing supporting documents
• coordinating with Revenu Québec for Quebec residents
• preparing and filing the clearance certificate request

We ensure all returns are filed accurately and that no credits or deductions are missed. Mackisen protects legal representatives from personal liability by completing all tax requirements before assets are distributed.

Real Client Experience

An executor contacted us after being overwhelmed by the number of returns required for a parent who passed away with multiple income sources, including pension income, investments, and a rental property. Mackisen prepared the Final T1 return, an optional T1 return, and a T3 trust return for estate income. We organized documents, reconciled capital gains, and successfully applied for the clearance certificate.

Another client inherited a business. We closed GST and payroll accounts, reported business income up to the date of death, prepared the necessary T3 filings, and ensured proper reporting of inventory and capital assets.

A family dealing with unfiled prior-year returns needed support filing multiple outstanding returns. Mackisen filed all overdue returns, the Final Return, and the T3 return, allowing the estate to settle without penalties.

For complex estates with multiple beneficiaries, foreign assets, or large investment portfolios, our detailed reporting and coordination prevented reassessments and ensured proper compliance.

Common Questions

What returns must I file for someone who died?
At minimum, a Final T1 return. Depending on the situation, optional T1 returns and a T3 trust return may also be required.

What is the Final Return?
The T1 return covering income from January 1 until the date of death.

What is the T3 Trust Return?
A return reporting income earned by the estate after death.

When are returns due?
Due dates depend on the date of death and whether the deceased had business income.

Do I need to claim capital gains?
Yes, in many cases. Death triggers deemed dispositions that may produce capital gains.

Can RRSPs be transferred tax-free?
Possibly, if transferred to an eligible spouse or dependent.

When can I distribute estate assets?
Only after obtaining a clearance certificate from the CRA.

Can I be personally liable as an executor?
Yes, if assets are distributed before taxes are paid.

Do I need to notify Revenu Québec?
Yes, if the deceased was a Quebec resident. Quebec has separate filings.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.