Losing a loved one can be devastating for friends and family. The days following the loss are often fraught with grief and stress. However, executors and legal representatives not only deal with the loss of someone they cared for, but they must also navigate the challenges that come from dealing with the deceased’s financial affairs—including taxes.
For individuals without the experience and know-how, managing their loved one’s financial matters and working with the Canadian Revenue Agency (CRA) can be a daunting and time-consuming task, especially when it comes to dealing with accessing taxpayer records. Working with an expert accounting firm can help you navigate the inner workings of the CRA, ensuring you are compliant with tax regulations while also helping to seek out tax planning opportunities and mitigate risks.
Prepare for the Worst
While none of us like to consider our own demise, planning for a time when you are no longer here is essential to leaving loved ones in a place to navigate your financial affairs and tax issues more easily.
Ensuring you have an accurate and updated list of your accounts, investments, income, assets, and debts is essential to providing your executor with the information they need at their fingertip. You should also make sure your files are easily accessible.
Hiring a CRA-approved authorized representative, like an accounting firm, before your passing is an excellent way to mitigate the painfully long and difficult process of accessing deceased taxpayer records. If the authorized representative has online access and has been preparing tax returns for the taxpayer in the years preceding their passing, CRA access remains intact – there is no requirement to go through aside from registering the will with CRA.
The Challenges of Deceased Taxation
For executors, legal representatives, and next of kin, the CRA requires a laundry list of responsibilities that must be fulfilled promptly, including filing any outstanding income tax returns (T1) and possible estate income tax returns (T3). How do you ensure all tax returns have been filed? You would think it’s as simple as calling up the CRA to understand the outstanding obligations. Unfortunately, that’s far from the truth.
Accessing a deceased loved one’s tax records can be lengthy and arduous, even at the best of times. Interactions with the CRA are often painstakingly slow, phone times have increased significantly since COVID-19, and the process of accessing a loved one’s tax records can take weeks or even months.
CRA Requirements
As a legal representative, you first need to notify the CRA that you are, in fact, the legal representative as dictated by the will or by the courts. There are two ways for you to notify the CRA that you are the legal representative:
- Register to Represent a Client.
- This requires you to have an online CRA My Account already. If you do not have your own CRA My Account, you must first go through the registration motion, which can take some time to set up.
- Once you have your REP ID, you need to submit online a series of documents to the CRA to prove you are, in fact, the legal representative. Assuming all documents are in order, this will take at least 28 business days.
- Once approved, you can access the deceased taxpayer’s account and see which returns are outstanding and any balances owed.
- You can also provide immediate access to another authorized representative, such as an accounting firm, by entering their BN.
- Mail or fax documents to the CRA. The documents noted in point 1b can be sent directly to the CRA to update your status as the legal representative.
- Once approved, you can grant an authorized representative offline access (phone, mail, or fax). The authorized representative will be able to communicate with the CRA. However, they cannot access the deceased taxpayer’s online account, which leads to inefficiencies and more lengthy phone calls with the CRA.
While the CRA has made the process for authorizing representatives much more stringent, presumably to enhance security, the process can be lengthy and complex, depending on your comfort level.
Benefits of Hiring an Accounting Firm
When tasked with acting as the executor/executrix of a family member or friend, there are many benefits from hiring an accountant – especially if you act as Power of Attorney (POA) for that person or as you become more involved in their health and financial affairs.
Working with a highly knowledgeable accounting firm ensures the appropriate credits are claimed, like the disability tax credit and medical expense tax credit, and as noted previously, the accountant’s CRA online access remains intact, allowing easy access to tax slips for the final terminal tax return.
Accounting firms can also assist with:
- Expertise in Estate Taxation
- Compliance with Tax Laws
- Efficient Administration
- Tax Planning Opportunities
- Mitigating Tax Risks
- Proper Valuation of Assets
- Complex Investments and Financial Instruments
- Communication with the CRA
- Record-keeping and Documentation
- Beneficiary Protection
- Estate Distribution
When dealing with the stress of losing someone close to you, having the support you need to manage tax affairs can relieve you during an otherwise difficult time. Working with an experienced accounting firm can help you deal with the CRA and deceased individual’s tax records, simplifying the estate administration process, ensuring compliance with tax laws, and providing expertise in navigating the complexities of estate taxation.
Contact Edelkoort Smethurst CPAs LLP in Burlington To Help You Plan Small Business Finances
When it comes to helping you manage a loved one’s estate, the trusted accountants at Edelkoort Smethurst CPAs LLP can help protect the interests of both the executor and the estate’s beneficiaries. Our CPAs are highly skilled and serve individuals, families and businesses throughout Burlington and the surrounding area. To speak with one of our knowledgeable Chartered Professional Accountants, don’t hesitate to contact us online or by telephone at 905-517-2297.