Canadian Tax Adviser
January 24, 2012
CRA Charging Stiff 20% Penalty For Missing Tax Slip
Toronto, Enterprise Tax
London, Enterprise Tax
The CRA is imposing harsh penalties on individuals who do not report income
from a T-slip on their tax return —
even if the omission was inadvertent. The CRA runs a sophisticated T-slip
matching program that checks the amounts and slips reported on your tax
return with data filed by your employer (T4 slips) or other slips reporting
investment or trust income (e.g., T5, T3). This is usually done after the
original assessment of your return.
There are several recent examples of the CRA imposing the federal subsection
163(1) penalty, and the provincial equivalent, on taxpayers who have repeatedly
failed to report income from information slips on their personal income tax
returns. The penalty is a combined 20% federal-provincial rate that may be
applied to the amount of the unreported income. As a result, when you are
gathering your personal tax information, ensure that you provide all your tax
information to KPMG (or another tax return preparer).
If you have extensive investments, you should take special care because
brokerage firms may issue late or amended slips.
Mr. X is the director of several companies and the owner of a sizeable
investment portfolio. As a result, each year he receives several T4 and T5
information slips. Mr. X inadvertently did not include $100 from a 2009 T5 slip
on his 2009 personal income tax return because he misplaced or never received
the T5 slip. The CRA noticed this omission when it ran its information slip matching
program for 2009 returns and reassessed Mr. X's 2009 return to include the $100
in his income.
When Mr. X filed his 2010 tax return, he forgot to include director's fees of
$25,000 reported on a 2010 T4 slip. Mr. X never received this slip because he
moved during the year and the slip was sent to his former address. Mr. X
discovered the omission after filing his return, but was not concerned as taxes
had already been withheld from the income (i.e., technically, he thought he did
not have an income tax liability).
The CRA's information slip matching program alerted the CRA to the $25,000
unreported income. As a result, the CRA charged Mr. X with a $5,000 penalty
under subsection 163(1) of the Act and the provincial equivalent, even though Mr. X did not have an income tax
liability associated with this income because the appropriate taxes were
For more information, contact your KPMG adviser.
The CRA’s authority for imposing the penalty is granted under subsection 163(1)
"Repeated failure [to report income]". This rule applies to taxpayers who fail
to report income in a tax return for a given taxation year if they have also
failed to report income in a tax return for any of the three preceding taxation
years. For federal purposes, the penalty is equal to 10% of the amount of income
not reported in the tax return for the particular taxation year, unless a
greater penalty under subsection 163(2), "False statements or omissions",