Payments related to the death of your employee

Content has been updated for clarity, completeness and plain language. No changes were made to the existing legislative requirements.

You may pay amounts related to salary and wages to your employee after their death or death benefits to recognize their service.

Determine your withholding and reporting obligations depending on the nature of the payment:

Death benefit
Payments made after death (employment income you owed to your employee before their death)

Steps

Determine if the payment was a death benefit

A death benefit is the gross amount of any payment made on or after the death of your employee to recognize their service in an office or employment. This can include payments to any of the following recipients:
- A surviving spouse or common-law partner
- An heir
- The estate of your deceased employee
- Qualifies as a death benefit
  - Payments that continue for a long time on a periodic basis, or for the lifetime of the recipient, if they were made under an employer's fund or plan that is distinctly separate from certain plans such as a superannuation or pension fund or plan, a salary deferral arrangement, or a retirement compensation arrangement
  - Payments to an employee who died prior to retirement that represent a settlement of accumulated sick leave credits to which the employee was entitled under the terms of the office or employment
- Does not qualify as a death benefit
  - A payment received out of a superannuation or pension fund or plan, and in general, payments received out of a salary deferral arrangement, or a retirement compensation arrangement upon or after the death of an officer or employee
  - Where an employee dies prior to retirement, a payment in respect of accumulated vacation leave
  - A payment representing deferred employment income that would have been taxable in the employee's hands under subsection 6(3) of the Income Tax Act (ITA) if the employee had not died
  - A payment representing overtime pay that would have been taxable to the employee under subsection 5(1) of the ITA if the employee had received the amount before death
- If the payment does not qualify as a death benefit, do not continue to the next step.
  
  Learn more: Determine the tax treatment of payments other than regular employment income
- If the payment qualifies as a death benefit, continue to: Step 2 – Determine which deductions you need to withhold.
Determine which deductions you need to withhold

You must withhold the following payroll deductions from payments related to a death benefit:
- Income tax, only on the amount of the death benefit that exceeds $10,000 – Withhold using the lump-sum rates
- CPP contributions – Do not withhold
- EI premiums – Do not withhold
Learn how to calculate income tax deductions for death benefits using the withholding rates for the lump-sum payments (Step 3) method
Report the death benefit on a T4A slip

You must report the payments related to a death benefit in the name of the recipient on a T4A slip:
- Code 106 – Death benefits
Under the CRA administrative policy, a slip must be issued if the total of all payments in the calendar year were more than $500 or you deducted tax from the payment. So long as the death benefit paid was greater than $500, you must still report the full amount of the death benefit even if no income tax was withheld.

Learn more: T4A slip – Information for payers

Steps

Determine which deductions you need to withhold from the payment made after death
1. Determine if you need to withhold income tax
  
  You must determine if you need to withhold income tax from the payment made after death.
  - Withhold
    - Salary and wages, accumulated vacation pay, taxable benefits, and any other amounts that were earned by and owed to the employee up to the date of death even if they are paid in the year after death
    - Payments for retroactive adjustments to employment income when a collective agreement or other authorizing instrument has been signed before the date of death
  - Do not withhold
    - Salary, wages, or other pay accumulated after the date of death
    - Payments for retroactive adjustments to employment income when a collective agreement or another authorizing instrument has been signed after the date of death
2. Determine if you need to withhold CPP contributions
  
  You must deduct CPP contributions up to and including the last pay dated in the month in which your employee died.
  
  You must also deduct CPP contributions from any amounts and benefits that are earned before the death of your employee and not yet paid to your employee on the date of death.
  
  For example, if your employee died on March 20, 20X5, you must stop deducting CPP contributions from the last pay dated in the month of March 20X5.
  
  How to prorate
  
  When prorating, use the number of months from January up to and including the month of death.
3. Determine if you need to withhold EI premiums
  
  You must deduct EI premiums from amounts paid up to the date of death.
  
  Do not deduct EI premiums from amounts earned before the death of your employee (such as salary, banked overtime, a bonus, or vacation pay) and not yet paid at the time of death.
Learn more: How to calculate
Report the death benefit on a T4 slip

You must report payments made after the death in the name of your employee on a T4 slip:
- Box 14 – Employment income
- Box 24 – EI insurable earnings
- Box 26 – CPP/QPP pensionable earnings
- Box 56 – PPIP insurable earnings if your employee worked in the province of Quebec
- Any applicable codes for taxable benefits
Learn more: T4 slip – Information for employers

References

Archived Interpretation Bulletin IT-508R, Death Benefits

Legislation

ITA: 5(1): Income from office or employment
ITA: 6(1): Amounts to be included as income from office or employment
ITA: 56(1)(a): Death benefits included in the income of the recipient (often the estate or beneficiary)
ITA: 153(1): Withholding
ITA: 248(1): Definition of a death benefit
CPP: 6(1)(a): Pensionable employment
IECPR: 2(1): Amount of insurable earnings
IECPR: 2(3): Amounts not included in insurable earnings

Page details

2026-07-30

Payments related to the death of your employee

Steps

Determine if the payment was a death benefit

Qualifies as a death benefit

Does not qualify as a death benefit

Determine which deductions you need to withhold

Report the death benefit on a T4A slip

Steps

Determine which deductions you need to withhold from the payment made after death

Determine if you need to withhold income tax

Withhold

Do not withhold

Determine if you need to withhold CPP contributions

How to prorate

Determine if you need to withhold EI premiums

Report the death benefit on a T4 slip

References

Related

Legislation

Page details

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