Death and Taxes

Both have been on my mind.

Tax season is here. The deadline to file personal tax returns is April 30th. This is a very weird tax year for me. I didn’t pay any taxes through payroll deductions last year (2009) because I’ve been contracting my services out. In simpler terms, I’m self employed.

Knowing that I have to pay taxes, I have put a sum of money away every month in a high-interest savings account, and just forgot about it. I have truly learned to look at the balance, which looks pretty nice right now, and understand fully that it’s not mine, it belongs to the taxman. Now, somebody is working diligently on my tax obligations and soon he’ll tell me what I owe.

The big question is – will it be enough? If it’s not enough, I have a problem. I’ll have to add to my debt load in order to satisfy my obligations. If it’s just enough, that’s fine.  If it’s more than enough, I can amp up my debt repayment, and perhaps add a bit more to emergency savings. This will all shake down this month. I’m really not sure what to prepare for. I don’t pretend to be a tax expert.

Over the Easter weekend, I visited with family. My father passed away last year, and my step-mother is still trying to figure out her finances without his income. While I thought she’d probably be okay, and still think she’ll be okay in the longer run, now she has to file his tax return. Yes, when you’re dead, the government still wants you to settle up with them.

Since he was sick for a long period of time (Leukemia), he was obviously not capable of working. He collected Employment Insurance for a number of months. What’s really weird is that no taxes are taken off your Employment Insurance benefits. My stepmom and father, who were dealing with hospitals, chemotherapy, radiation, were happy to just let the cheques be automatically deposited in their account and move on. Now, there’s a tax bill due. Just when my stepmom figured that things were mostly all dealt with eight months after my father’s death, there’s a tax bill. For her, just like me, it’s a question of how big is the bill.

Unlike me, my stepmom is a senior citizen, she does not work and will never likely work. She lives on her government pension, a small rental income from a basement apartment, and a portion of my father’s pension. The house is paid for, but there are still municipal taxes, utility bills, etc. Oh, and a person has to eat! Dad had life insurance, but it wasn’t enough to cover his obligations. It was enough to cover his funeral, but not the money owing on the boat, or the camper, or the hardware store credit card. I’m sure he never once thought about his tax bill after he was gone. Who does? If it’s a big tax bill, how will she pay it? It’s not like she can ask for extra shifts at work or take on a part-time job.

While I’m nervous about seeing my own tax bill soon, I’ll be glad to get this little piece of my financial puzzle out of the way and move on with it – whatever the outcome is. Meanwhile, at some point soon, I’ll have to review my own life insurance coverage and make certain that it’s enough to cover all my obligations, even that final tax bill.

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3 responses to this post.

  1. Hi, just came across your blog today! Are you sure the EI benefits had no income tax taken off? I know they do not deduct for EI or CPP, however, if I recall correctly there is income tax taken off. Now, the last time I was on EI was 2005 when I was on maternity leave, but I am sure I had about $60 or $70 in taxes taken off every 2 weeks.

    From http://www.servicecanada.gc.ca/eng/ei/types/regular.shtml#much

    “Your EI payment is a taxable income, meaning federal and provincial or territorial, if it applies, taxes will be deducted.”

    Now, of course, if there was other income, then there still may be some to pay. It may not be as much as you might think

    I am enjoying your blog…I am going to do peruse your archives.

    Reply

    • Hi there, nice of you to drop by! Yep, I’m sure. My step-mother had an accountant look at the paperwork. I was speaking to another friend about this, and they too collected EI for a short time the year previous. She confirmed that she too had the same experience, had to pay the tax because none was deducted. Apparently if you want the tax deducted, you have to go down to either the CRA or the EI office, fill out a form and have the deductions taken off.

      It never used to be that way. My ex-husband worked seasonally, and collected EI for a couple of months most winters. He was most certainly taxed then. Did you have a different experience?

      Reply

      • Yep, all three of my maternity leaves…always income tax deducted automatically I didn’t have to fill out anything to get it taken off. No CPP or EI was deducted though. My ex-husband also collected EI, same thing. Maybe it’s new? The last time I collected EI was May 2005 to September 2005.

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