Did a missing tax slip such as a T3 or T5 or T4 show up in your mail box after you filed your taxes last spring? Did you find a forgotten one in a drawer? You must file that tax slip with the Canada Revenue Agency (CRA) right now !
Thinking that CRA will simply pick it up and reassess? Think again. You will be shocked to know that a retired tax payer was recently imposed a $3,600 penalty by CRA for failing to include a T5 slip. This penalty was on top of the interest and tax owed on the income.
Here is an example. In 2011 tax year you forget to report a $50 T5 slip from the ABC Financial Institution. OK, no big deal; Canada Revenue picks up on it, reassesses you later and charges you about $15 tax on that $50 of income you forgot to report. But you have used up your “strike one”. Now in 2013 tax year (which you report in the spring of 2014) you have an $18,000 T5 slip that you forget to include. Canada Revenue will assess you the tax owing on that $18,000 which results in a surprise tax bill of about $5,400 plus interest. But on top of that they will assess you a 20% penalty of the amount of income you failed to report or an extra $3,600. So you pay the $5,400 tax you owe on that $18,000 plus a further $3,600 penalty !
If two T-slips in a four-year period are not reported you may face this 20% penalty. It is 20% of the T-Slip income not reported, not of the tax owed. This penalty is very steep and means that you need to make sure that you include all T-slips even if the amount is very small. If you realize you have forgotten a T-Slip from 2013 or from a prior year bring it in to us so we can prepare a T1-adjustment.
Please note that it is ultimately the tax payer’s responsibility, not the tax preparer. As you know, we make every effort to cross reference with the previous years and with your investment accounts to ensure that all your T-slips are indeed reported. But again, you are ultimately responsible for giving us all documents needed to prepare your declaration.