Late Final Return for a Deceased Person in Canada: Penalties

As an executor or other legal representative, you are responsible for making sure a final return is filed and any balance owing is dealt with. If the filing date has passed, or you can see it will, the cost of delay is worth understanding quickly.

This article explains how the late-filing penalty and interest are worked out, which dates do not move, and what relief may be available. Your facts may change the picture, so a lawyer or accountant can confirm how this applies to you.

This article covers Canadian federal tax law, which applies in every province.

How the late-filing penalty is worked out

If a final return is filed late and there is a balance owing, the penalty is 5% of the balance plus 1% of the balance for each full month it is late, up to 12 months. The penalty may be higher if a late-filing penalty was assessed on the deceased's return for any of the 3 previous years.

Filing on time avoids this penalty even if the balance cannot be paid in full. That is why filing the return is usually the first priority, even when money is tight.

Interest and the payment date

Interest is compounded daily on unpaid amounts from the day after the due date until paid, and interest also applies to late-filing penalties.

The payment due date does not change when a later filing date applies, so you may need to pay before filing to avoid interest. Overpayments are generally refunded once the return is assessed.

• Death between January 1 and October 31: the final return and any balance owing are both due April 30 of the following year.
• Death between November 1 and December 31: the final return is due 6 months after the date of death.
• Self-employed deceased: the return may be due June 15 of the following year for death from January 1 to December 15, but the payment date is still not extended.

Weekends, holidays and instalments

If a due date falls on a weekend or CRA-recognized holiday, a return is on time if received or postmarked by the next business day, and a payment is on time if received the first business day after the due date.

No instalments are required after the date of death. Only instalments that were due but unpaid before death must be paid.

Other returns: prior years and the T3

If a T1 return for a year before the year of death was not filed, the legal representative must make sure it is filed. Other prior-year returns already due keep their original filing and payment dates.

A late T3 return for the estate is treated differently. It carries an alternative penalty of $25 per day even with no balance owing, with a minimum of $100 and a maximum of $2,500. A T3 is needed if the estate earns income after death or distributes property to beneficiaries.

Relief options and what to do next

• Cancellation of penalties or interest: the CRA may cancel them if a late filing was caused by circumstances beyond your control, requested through the CRA's cancel or waive penalties and interest process.
• Deferral on a rights or things return: payment of part of the tax can be deferred with acceptable security and Form T2075, but interest still applies.
• Late elections: in some situations the CRA may allow a late election affecting a final return.

• Confirm you are the legal representative and have notified the CRA of your role.
• Gather the death certificate, the will or court document, and the deceased's slips.
• File the final return as soon as you can, even if you cannot pay in full.
• Pay what you can to limit interest.
• Keep a record of why the delay happened in case you ask for relief.
• Speak with a lawyer or accountant before distributing property, as a clearance certificate is generally needed first.

Frequently asked questions