Monday, July 5, 2010

How do I get a Tax Clearance Certificate


A tax clearance certificate is a notice you receive from Canada Revenue Agency that states that all taxes owing on an estate have been paid. Although it is not the law that every executor must get one, the majority of executors will do so. This is because if the executor goes ahead and distributes the estate to the beneficiaries and then later finds out that there is tax owing, the executor himself might have to pay the taxes out of his own money.

I'm often asked how a person goes about getting a tax clearance certificate. The certificate does not come out automatically; it has to be requested in the right way at the right time. The vast majority of executors that I've worked with have asked the accountant who does the tax returns for the estate to request the clearance certificate. This is because accoutants who are familiar with taxation know how and when to get it.

However, if you want to request one yourself, here are the basic steps:


  1. file all of the necessary tax returns for the deceased and the estate;

  2. receive the Notice of Assessment for the returns you've filed;

  3. fill in a form called TX19, that you can find online here;

  4. send the form to your local tax office, along with a copy of the Will, a copy of all probate documents and a statement of proposed distribution.

  5. wait.

It takes a long time to get the tax clearance certificate. You should expect to wait several months in most cases. Because of the long wait and the unwillingness of beneficiaries to wait longer than necessary for their inheritance, there is a process in place for making an interim distribution of the bulk of the estate while keeping back enough money to pay the taxes and future expenses. I'll post about that interim process in a separate post.


To go to the Canada Revenue Agency page on clearance certificates, click here.


7 comments:

  1. Are beneficiaries required to provide their SIN number to estate executors for any reason at all??

    ReplyDelete
  2. I am confused about the period covered. For someone that died in 2012, do I put the date of death or December 31 or the date of requesting it? I don't want to date it now if CRA is going to ask for a 2013 tax return.

    ReplyDelete
  3. Our lawyer said he had the Certificate of Clearance and distributed the inheritance. Now one year later Canada govt re-assesses and says there is almost 100k owing. Is it up to the beneficiaries to pay or has the laywer made a mistake and should be responsible?

    ReplyDelete
    Replies
    1. Did the lawyer actually have the certificate? If he really did have it, he didn't make a mistake. I assume you have a copy of the certificate.

      Also, who applied for the certificate? Did the lawyer apply for it, or the accountant? I'm wondering because the certificate would have been based on the information on the tax returns. Lawyers should not be preparing tax returns for the estate, so I hope you had an accountant for that. If the lawyer prepared the actual tax returns for the estate, then yes, he made a big mistake and should be liable.

      Lynne

      Delete
  4. Do you have to get a clearance certificate if there is no money in the estate or any property or assets to sell. There is more debt then anything and still owes Revenue Canada $3,600, credit cards have been written off, sold personal belongings for about $360 - doesn't even cover my costs

    ReplyDelete
  5. Do you have to get a clearance certificate if there is no money in the estate or any property or assets to sell. There is more debt then anything and still owes Revenue Canada $3,600, credit cards have been written off, sold personal belongings for about $360 - doesn't even cover my costs

    ReplyDelete
    Replies
    1. If there is still tax owing to Canada Revenue Agency, you can't get a clearance certificate. The certificate is only issued once all taxes are paid.

      Lynne

      Delete

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