How can you be issued a 20% penalty for missing information the CRA has on hand? Read on and you will find out!
In the next month or two, the CRA’s matching program will begin kicking out notices of reassessment to Canadians whose reported income on their 2012 income tax returns does not match the CRA's records. Some of these income tax filers will be assessed penalties of 20% on income not reported. Yes, that is income not reported, not tax underpaid! This penalty applies to income tax information your employer or financial institution provided to the CRA which was not reported on your return. In most cases, the omission of income was purely unintentional.
What is wrong with this picture? How can one be considered to not have reported income that the CRA has in its database? Is this not a penalty for failing to confirm income, as oppossed to not reporting income?
In this two part blog, I am going to look at the penalty itself and why I think it is egregious, as well as how the CRA could easily remedy the situation. Long-time followers of this blog will be aware I have written about this penalty a couple of times. However, this week’s blogs look at the penalty from two new perspectives:
1. The matching aspect
2. How I think the CRA could easily address this issue.
So let’s start from the beginning.
The Matching Program
The CRA’s matching program catches the non-reporting of income every fall. Each year the CRA checks the T-slip information in its database against Canadian taxpayer’s income tax returns to ensure the T-slip income reported matches. Where the income filed by a taxpayer does not match the CRA's database records, an income tax reassessment is mailed to the taxpayer asking for the income tax due. If the taxpayer is a first time offender, they are just assessed the actual income tax owing and possibly some interest. If this is the second occurrence in the last four years, a 20% penalty of the unreported income is assessed.
The Penalty Provision
amount you failed to report the second time. A corresponding provincial penalty is also applied, so the total penalty is 20% of the unreported income.
Ouch! Is this Fair?
I find this penalty unfair for the following reasons:
1. It is excessive. I can accept a penalty of 5%, maybe 10%, but 20%?
2. The penalty can be levied even if you owe no income tax. I.e.: If someone in Ontario fails to report a T4 slip with $5,000 of employment income and the slip also reported $2,325 of income tax deducted, they would owe no income tax, as the maximum marginal income tax rate of 46.41% was applied (ignoring Ontario supertax). However, if you had failed to report income in any of the three prior years, the penalty under subsection 163(1) would be $1,000 (20% x $5,000), even though you owed no income tax and the CRA was provided this information by your employer.
3. The penalty can vary wildly on the exact same total of non-reported income. If you fail to report $2,000 two years ago and fail to report $100 this year, your penalty is $20. However, if you failed to report $100 two years ago and failed to report $2,000 this year, the penalty is $400! That is a huge difference in penalties for the exact same total of unreported income.
4. Most penalties relate to T-slips taxpayers did not knowingly ignore or evade. In most cases, the missing income relates to T-slips lost in the mail or sent to the wrong address. Also, as a reader notes below in the comment section, many T-slips are now issued online and easy to miss.
According to an article by Tom McFeat of CBC News, the number of Canadians penalized for this repeated failure to report income totaled over 81,000 in 2011 with an income tax cost of slightly over $78,000,000.
To be clear, my issue with this penalty is that taxpayers in most cases are being penalized where there is no intent to hide income and the CRA receives that information. However, I am not as forgiving with the non-reporting of rental income, capital gains or self-employment which relies on taxpayer honesty.
Tax Tip for T-slips Received after You Filed Your Return?
I think most people will agree that this penalty is excessive. Wednesday I suggest a simple solution to the issue. However, here is a quick tip before you leave. If you received a T-slip after filing your tax return and ignored the slip since it was a small amount, dig it out tonight and file a T1 adjustment as soon as possible before the matching program gets you. Even a small $10 missed slip will start your clock ticking for a potentially larger penalty if you miss reporting income again in the subsequent three years.
The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs. Please note the blog post is time sensitive and subject to changes in legislation or law.
I suppose if you have no tax owing, another good practice would be to file your return as late as possible, even into April to give the CRA online my account service time to show all of the T slips CRA has on file. That way you could check the CRA website for your T slips before filing. Lost in mail is one thing but some companies are now issuing slips exclusively online so we have to remember to check a bunch of different websites.ReplyDelete
Can you see your T5's and T3's on your online account? We can only see T4 related slips for clients we have access to?
also great point about the online Tslips
Nope, and specifically it says T5s are not available at this time, just saw that today as I checked into CRA onlyn MyAccount for this very issue!Delete
Yes, the online T slips are wicked. We had a small amount of money in a "capital accumulation plan" at work. I got the T slips in the mail for the bulk of what it had done the previous year.ReplyDelete
Like every year I checked our return against the previous return to make sure I had all the T slips. It looked fine: I sent it in.
A month later I was wandering around our CAP online system for other reasons and I discover they changed something or other and suddenly we had a T slip for about 17.40 in foreign dividends. Because it was under $50 they didn't mail it out, but they did still issue a T form.
Based on your article, it's lucky I filed an amendment to our taxes as otherwise if something similar happens in the future we could get zinged. (We found this extra slip in July and immediately filed the amendment.)
As you say, 20% of the *income* does sound unreasonable for a first or second offence, especially if there was no actual tax owing.
Good thing you filed the amendment. Most people ignore small slips and they really can come back to haunt you in the future if you miss another larger slip.
Forgive me but isn't it 10% (5% penalty federal and 5% provincial) for the first time offender then 20% for repeat offender??ReplyDelete
No, u r wrong. There is no penalty the first time and 20% the 2nd time.
As per KPMG:
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 (penalty is 10% Fed and 10% Prov)
So what is the difference between forgetting to report or failing to report vs. tax evasion?Delete
Not necessarily a simple answer, but evasion will be willful conduct vs accidental conduct in failing to report.
Here is a link to a detailed explanation.
Last year(2012) I forgot to do my taxes and I got a phone call from the CRA saying I owe them just over $10000, I made about $53000, not sure whats up with that is it too late to claim my 2012 year tax??ReplyDelete
The CRA sometimes just estimates your income when you have not filed, so I dont know if the $10k you owe is just made up by the CRA or based on actual slips. I would find out if they have actually assessed your return; if yes, file a notice of objection and then file your correct return. If they have not actually assessed u, tell them you are filing and file immediately.
Thanks for the response. I actually filed them feb 2013 on turbo tax but of course can't get the file to open. The CRA said I claimed zero income for that year and on there file they said I made $53000 . So I went to an accountant to refill but I never told CRA will that be a issue or will it clear right up? Stressed out to the max about thisReplyDelete
Justin, it will sort itself out. If you had not yet been assessed by the CRA for 2012, then the new filing will clear everything. If the CRA had already assessed you, then the new filing may cause some admin issues that you or your accountant will have to sort out. . Dont stress, it will eventually clear itself.Delete
This is policy is definitely unfair - a taxpayer could be penalized because someone didn't mail out a tax slip (ie, it was under $50 and they weren't required to by law), Canada Post lost or misdelivered mail (I just got a Christmas card this week that was postmarked in December from a town that is only 50 km away), or worse, someone could use my SIN number for their earnings and I could actually get a penalty on top of having to pay someone else's taxes (how did you think undocumented workers get paid?) I think it is high time that we have a system in this country where we can go on the CRA website in March or April and file our tax return right there based on the T-slips that have been submitted by February 28th. The infrastructure is there, we as taxpayers have paid for it, let us use it to make our lives easier.ReplyDelete
I actually had a blog a few months ago that said the same thing. You should be able to get all your slips online from the CRA.
They must have a lot of angry taxpayers mad at them because I can't get through on the phone line. The message says they are overloaded and to "try again later" .ReplyDelete
I have an interesting scenario - what if someone has filed a T4 slip with Rev and you never even worked for them? yet it is coming back to bite you in butt years later - as is the case with my sonReplyDelete
I cannot help u this is a very messy situation and u would need at minimum to somehow get a signed document or somehow prove ur son did not work for the company. Good luck with thisDelete
What's the best way to fight the "Repeated failure to report income" penalty? Two years ago I made a simple mistake on my tax return. Last year I made a careless one. The upshot is that I now owe nearly $9000 in penalties, in part because my mistake last year was failing to report a vastly greater amount on my tax return than the year before.ReplyDelete
I feel for you. I have had a little success writing to fairness, but no guarantee.
Hi, Love your blog - thanks for sharing all this useful information!ReplyDelete
I might be affected by this potentially - because of the joint account income reporting and T slip matching
I just got a reassessment where CRA referred to a T5 slip and stated that the amount reported should be larger (and reassessed, resulting in me owing them money, under $100 but still).
The thing is that we did report the full amount from this T5 slip - this was a joint account with my parents (3 people) and I reported the 1/3 of this amount on each of our tax returns. All three names were on the account and same address (my parents reside with us) but only my sin shows (there is space for one sin only and bank said it is kind of random for joint accounts)
In fact, based on the CRA rules (income from joint accounts based on contribution) I probably should have reported all this income under just my parents as this is an account that contains their money only and I am helping them manage (as they do not speak English or know how to bank in Canada or use online). If I did not put 1/3 under my income, it would have been even better for us combined (as I am in a higher tax bracket) . But I was worried about not reporting anything on my return for this slip because my sin is there so I did equal split (which was technically in government' favor)
But in the reassessment they seemed to decide that I should have claimed all slip amount under just me (probably just from automated matching).
Not sure what to do - what concerns me most is that I am probably now flagged as someone who underreported income, am I? Thus potentially risking a penalty in the future...
Any advice? If I write to them explaining , would they 'unflag' me from their watch? would writing them a letter help me in the future to argue that I did not violate in the past (in case of a mistake, god forbid)?
This is a very common reporting issue. I will not comment on who should report the income, as I dont provide personal tax advice on this blog. The financial institutions typically just report one SIN on T5's, even if joint and many people are reassessed by the CRA because they match the SIN number on the T5, even though the joint owners allocate the T5 on their returns.
The correct thing to do would be sort this out with the CRA through a letter (just sticking to the facts, the account is joint and was allocated amongst the joint owners-do not provide a history of who owned the account), T1 adjustment or notice of objection. I cannot comment on whether this will "flag" you, but in the past my experience has been this has not flagged people, however, however, I cannot provide any guarantee in that regard.
Thank you for taking time to reply! I will try sending an explanation letter to CRA (and I paid that balance just in case, do not want to incur any extra interest charges).Delete
Hello Mr BeanReplyDelete
Just got a letter from the CRA T1 Matching Program.
Is this common ?
I reported all T forms i received.
Is this just to do with T forms or other sources of income like rental income.
The letter states : "We regularly conduct review programs as an important part of the self assessment tax system.We have selected the above noted return for review.
We would like to discuss your file regarding reported income and/ or unsupported deductions"
what are they looking for.
Also they have only given me 5 days to reply or they will reassess my return based on the information they have on file.
What they have ,based on my online t slips match what i submitted.
Fishing trip? or should i be worried?
Thanks in advance
Worried in BC
Typically when you are caught under the matching program you get reassessed and the CRA informs u what slip was missed.
The CRA also issues standard letters, typically to self-employed people or people reporting rental income, to remind you the system is self assessing, with an underlying message "be aware, we are watching you, so report all your income and expenses properly", but are not audits, just "friendly reminders".
Your letter is a bit strange since I have never seen a 5 day response period, it is typically 30 days and it seems like a hybrid.
I really cant help you, not sure what is happening in your situation.
I can't understand . This is the second review of my 2013 return. It may still have to do with my pension commuted value payout. What other types of income does the program look for.
As I said above, I dont think this is a matching issue, maybe speak to your accountant or get a consult from oneDelete
Hi. So last Saturday, I already file my T4, T2202A and T4A. However, last Wednesday I got another T4A's in the mail (stating my Ontario tuition grants etc.) because I am on OSAP. I went back to my accountant yesterday to ask what I am gonna do with it but he told me I have nothing to worry about and everything is fine since the CRA will adjust it for me. But reading all the comments here, I am afraid to get penalties if don't send a T1 adjustment when my notice of assessment comes. What is the right thing to do? Help!ReplyDelete
I would suggest you file a T1 adjustment.
That's what I'm planning to do when I get my notice of assessment. Thank you.Delete
Hi. I have another question. The tuition grants goes to line 130, am I right? But my notice of assessment doesn't show Line 130. How do I file it on T1 adjustment. I'm confused.ReplyDelete
If your grant qualifies as a scholarship it is not taxable and thus you dont report anything on line 130. I make no assertion as to whether your grant is taxable or not.Delete
Darned if my wife & I got just got reassessments on our 2013 tax year, adding 50/50 interest income to both, she will pay back underpaid tax (she had a refund for 2013) + interest + (10+10=)20% penalty, I will pay underpaid tax + interest too. The re-assessment showed me it was one of our banks (and little else to go on) so I asked & the were able to narrow it down by the added amounts, to a single T5 I don't seem to have (I have a reprint now of course) and I've yet to figure out what 1st Strike against my wife was, but chances will be another T-slip that went missing.ReplyDelete
Of course, the missing T5 was for $20K, the penalty is 20% of 1/2, i.e. $10K, or $2K.
Not fair to go after the low hanging fruit, the honest but hapless middle-class tax payer! Tsk tsk! Shame on CRA!
Sorry to hear that. Should you ever be assessed a matching penalty I would apply to fairness as you did report the T5. They maybe would have some sympathy.
I filed my tax return early last month online and already got my return back. Yesterday I got another t4 slip that I did not know I would get. It's a small amount that I did not pay taxes on. What should I do ?ReplyDelete
File a T1 AdjustmentDelete
We received ODSP for 2014! I Ended up having to pay it all back in full this year, however I received a T5 anyway for this year! I have a lawyer who paid them back from a trust fund and a breakdown of all the payments I made! Do I still have to claim that money I received from ODSP as income or do I ignore the T5 as I had paid it back in full?ReplyDelete
Sorry, I have no clients who receive the ODSP and thus have not looked into how it is reported and treated for tax.Delete
In the case of an estate, if the executors of an estate become aware of additional estate assets after filing the final tax return (in our case, 12 years after), provided that we amend the tax returns accordingly to account for the 'newly found' assets, will be get a penalty or interest dating back to the date of death 9n this case, 2002)? We became aware of shares that our father held in his name just this year, along with dividend payments that were not issued due to 'no forwarding address' on file.ReplyDelete
My sister and I administered our father's estate back in 2002 upon his death. HIs esate assets were quite small, having liquidated his assets some years before (or at least we thought). This year, we became aware of a significant stock and dividend asset which we never knew he had.ReplyDelete
So, we plan on amending his final tax return to include these assets in his tax return, including a deemed disposition of those stocks, which wer obtained through a demutualization in 2000.
Will CRA levy either a penalty, or at least interest costs on the capital gain tax that would have been payable, back to 2002? Would interest be 12% per year for 12 years?
If you filed the return on a timely basis, there should not be any penalty applicable. As for the interest, the government uses a prescribed rate which changes every year and would typically be far less than 12%, especially that last few years. Your issue will be the compounding of the interest, which could be substantial.
I have not had a similar situation with an estate, so I am not sure if the CRA would provide any relief (I doubt it). If full interest is applied, you could try making a fairness application, however, I am not sure you would receive much sympathy.
Very interesting read. I have a similar situation. I completed my wife's tax return and entered her T4 information as normal. Not realizing that the company decided to issue 2 T4's that year. The second T4 I did not catch as it was attached electronically at the bottom of the first (I did not scroll down). Anyway just got a $6K fine from CRA. Seems excessive for a simple mistake. I thought they would just correct things like this because as you mention we are not evading tax, that is already paid. Do you have any advice what to do next? You mentioned only repeat offenders get a fine but the only other mistake was an RRSP over contribution which I corrected. Any help appreciated.ReplyDelete
The penalty cannot be levied unless your wife did not report income in one of the 3 prior years. Thus, firstly you will want to confirm that she in fact did not report income in one of the 3 prior years.
The 2015 budget brought in changes to this rule. the penalty will now be equal to the lesser of 10% (penalty is 20%, as there is also a 10% provincial penalty) of the unreported income and 50% of the tax unpaid.The penalty will not be levied going forward if there is no tax caused by the missing info.
Thus, you may want consider as one of your options to write to the fairness committee and say it is unfair to be penalized for a law the government changed because it realized it was harsh. However, there is no guarantee the committee will reverse your penalty.
Thanks for the info. Unfortunately my wife did have some small dividend income that was undeclared within the last 3 years so that will not work.ReplyDelete
We just received the formal penalty notice. To add insult to injury we are actually in credit $60. So this is purely a reporting error penalty with interest = $6K. It actually makes me very sad that the CRA treats people this way and has totally blown my faith in the system.
Anyway we sent a letter mentioning the law change as you mentioned. I assume when you say the "fairness committee" you mean complete the "Tax Payer Relief form". They said I can't meet with anybody in person and it may take six months. So we have to pay the fine or pay a fine + interest if they do not agree in our favor. Feeling very angry right now. It seems very harsh.
Yes taxpayer relief. The penalty is unfair and it is great the CRA amended it. U unfortunately r one of the last people caught under the old rules so hopefully fairness will take that into accountDelete
Update regarding the large penalty I received in January. I called the Tax Ombudsman and was advised to file a notice of objection. Just got a call from the person dealing with the objection (6 months later) and they are going to reverse the fine and even give interest back. All in all a great outcome. The Tax Office does have a heart!!Delete
Nice to hearDelete
I just received a T4 for 2015 income that was actually earned in 2014. I received a T4 from this corporation in 2014 as well for a smaller amount. Because I was a casual temporary employee for 1 month I didn't question the small amount of income on the 2014 T4. Do I just file this 2015 T4 this year even though I worked someplace else and have a T4 from them for the same period? Do I mention this error or just file all T4s saying nothing? I thought corporations had to issue all T4's by the end of February and this is a year late. I don't know why this income wasn't included on the 2014 T4 they issued. Any penalties assessed to them???? I doubt it.
My name is mark not martinDelete
I would just file in 2015, why complicate your life trying to sort out
Thank you for your response Mark and please accept my apology for addressing you as Martin - I don't know why I did that.Delete
Can you tell me why entering my spouse's T4 affects the amount of my return (and vice versa) on tax software? I thought that CRA assesses returns separately?ReplyDelete
There a various child claims & credits, spousal credits etc that are based on total family income. It may not impact your return, but it impacts hundreds of thousands of returns
This turns out to be an issue with the way that tax software often displays your tax owing/refund. After the first return is completed, the amount is displayed. But as soon as income is entered for the spouse, the amount changes. I discovered that tax software often claims the "Line 303 - Spouse or common-law partner amount" automatically, until the spouse's income is entered.Delete
This is super confusing if you're watching the tax owing/refund, since it inexplicably drops when the spouse is entered (around $2400 if the spouse makes at least the basic amount).
We booked a cruise quite a while ago forgetting about having to complete our taxes by end of April. We leave next week and we still have not received one of our T5 slips which has been historically late in arriving. My question is, can I guesstimate the amounts on UFile from last year’s T5 and when we return May 5th submit an amended form online?ReplyDelete
Sounds reasonable to meDelete
I sent in a VDP (voluntary disclosure) in 2015 for tax owed in 2005, 2006 and 2007. I included a penalty along with the tax. My understanding today is that penalties are waived on a valid VDP disclosure - it was an error to include it. Is there any way to receive a refund of the penalty amount?ReplyDelete
Once the CRA assesses your return they will likely issue a refund if you are owed one. If not, call and ask for a refund. Sometimes they put the payment into the installment account for the wrong year.
Does the matching penalty apply when a company reissue a T4A amendment, almost a year after a given taxation year.ReplyDelete
We understated a T4A to a contractor by $35.00. I figure by the time I do an admendment, and the vendor does an admendmend, it's going to cost the CRA more in administration fees, so I will probably just add the amount to this years T4A for the Vendor, rather than creating a potential matching penalty problem with the vendor, if they don't act on the amended slip for such a small amount.
The matching penalty does not relate to amended slips, unless once the slip is amended, it is not reported
Hi Mark....this year i did a stupid thing...i worked illegally for a month and used a fictious SIN number...i didnt realize how much trouble i had got myself in until it was too late...at which point i quit the job discretely..and left canadaReplyDelete
how long do you think i have before they find out and have them breathing down my neck?
I have no experience with this so I dont know the repercussions or whether they will even find you. You should probably speak to a tax or immigration lawyer to see what you can do.
What paperwork does CRA get when someone sells a secondary property (cottage)? Is it also a T slip? Thanks!
The CRA is not provided any official docs or T-slip. However, some accountants think the CRA is going directly to cottage municipalities to determine cottages that have been sold and then tracking the owners to ensure they have reflected the disposition for income tax purposes. But no one knows for sure.
My spouse is a US citizen, but is resident here in Canada and has been here working and filing taxes for over 10 years. We were unaware but apparently my mother in law had bought some stock in my spouse's name (and social security number) through her US company stock purchase plan. The program was set up to do dividend reinvestment. So it appears that there may be over 10 years of undeclared dividend income. Are you aware of what information is shared via IRS to CRA in relation to this or potential sale of the shares and thus potential capital gains? Apparently the CRA has yet not picked on this and I don't want to get slammed by a large penalty at some distant point. Assume voluntary disclosure is the only way to address this.
I dont know exactly what the IRS provides to the CRA. As an accountant I cannot tell you not to report the income. A VDP would be your alternative.
Hi Blunkt..MyVDPwas accepted in PQ. From 1998-2005, The amt due sent & was calculated at my home province and did not penalize interest owed for 98-05 & thencalculated amt due from 2006- 2015, did likewise..but there was only interest for years 2006-2008. So should all be good....but I made a big mistake...ReplyDelete
My parent & I are co beneficiaries of original amt in question from my father...I prepared the forms for each of us Mom ^ Me ...while declaring the entire amount instead of 1/2- of the original amount which I should have done-- the boxes of files indicated just that...as did my covering letter all in PQ!!I called backVdpOfficePq they did give me numbers to call) and they told me to prepare forms of readjustment which I did.stating exacly what happenned.(almost 40 pages)
Ater about 7.5 months, IReceived letter from home province with ..a note that there would be no alleviation of interest for 98-2005, citing Tax Law. would only go back 10 years..despite...that they had done so..a few months earlier January this year.. In the second letter I rec'd the home prov did make changes in 2006-2015--thee years only 2006-2007--2008 with interest ..did the same as January-waived not only the interest owed but halfed the interest owed which wqas my original and only concern----but never did half the interest...of previous years 1998-2005. The third letter I rec'd only indicated the amt owed (which has been paid-btw)--The years from 1997-2005 were not even touched. I am frustrated...and I feel as though I am misunderstood.
I have followed the Income Tax to a tee I was under 30 days between asking for a readjustment.....except for being dumb. They even have the form from the bank were the estate changed my Dad's name from acct to my mother and me. The original amount of money..would barely buy you a plain Jane Can/Am 4-door sedan -- hence the reason I was counselled by a friend do prepare own paperwork. So what do you suggest......I have no telephone numbers for my prov CRA big bldg...but I do have fax. I do have two names....the person who informed me that 97-2005 interest would not be waived and the accountant who calculated interest for 06-08.
Perhaps, I should send general letter to Home Province.?? The PQ office does get it...and also told me to call anytime. but the ball is in my province's court--it is a major centre...I have not spoken to anyone...should I fax...how do I talk to a real person on this end....?
BTW..The orignal amount in question may buy a plan Jane Can/Am sedan..hence I was counselled to do my own paperwork.... The Federal govt.does suggest that there are times when client and CRAare misunderstood. A suggestion would be most appreciated. Signed....& thanks....Learning is expensive...Sobri... Thank you very much. (If it weren't for my own stupidity, my overall experience would have been v. good.)
I would engage an accountant to help you sort out your options as this is too complicated for me to answer on my blog.Delete
I just realized how much I wrote. I am much inclined to pay leave as is (5k in excess) because it could get worse. Thank you v. much.ReplyDelete
Yes, it was a long winded question :)Delete
Hi Mark, I received a reassessment from the CRA with an amount owing $5,000 + penalty. I had filed 2 separate T4s, one was when I was a contractor(owned a corp) and the other when I was a full time employee. I contacted my accountant I worked with when I had a corporation and he indicated that I did not include the corporation T4 with my personal T4 file thus the penalty.The CRA seemed to add on the total income in my corp over to my total income on my T4 as an employee and calculated the tax I did not pay. Is this something I can file an objection for?ReplyDelete
I don't really follow what your are saying. If you are saying that the CRA just included the missing T4 and assessed tax and penalty, your only avenue is to file a fairness application.
If you are saying the CRA has double counted, you should file a notice of objection.
Mark - does the CRA know how much you contributed to an RRSP?ReplyDelete
I think the financial institutions provide that info, as I have seen occasional penalties for over contributions, but I cannot answer with 100% certainty
Hello, great article! Are you charged with a "strike" against you if the CRA reassesses your return to include a T3 slip you have missed? It is explained to me that you cant do an adjustment until your return as been assessed. So therefore, you could realize your mistake mere seconds after you EFILE and there is nothing you can do about it. So if the CRA were then to reassess and correct your missed T3 before you get the chance you would have a strike against you even though you realized your mistake right away?ReplyDelete
It would be a strike if the CRA reassesses you for a missing T3 slip. However, the matching happens in the fall, so if you file an adjustment once you have been assessed, you will likely beat the matching program and thus, not have a strike.
Great! Thank you again for the info. I am now left wondering how it was thought this "system" was a good idea in the first place? I mean I would think these decisions are made by intelligent people who know what they are doing. How does this even pass muster?Delete
It was ridiculous, but this is an old article, if you are not aware, this was changed in the 2015 budget http://www.thebluntbeancounter.com/search?q=2015+budgetDelete
After filing my 2019 income tax around end of May 2020, I found out from CRA MyAccount that there was a reassessment of my 2018 income tax dated 23 Dec 2019. It deemed that I owed $521.77 ($501.84 extra tax plus $19.93 Interest in arrears).
The explanation was as follow:
"We included the interest, other investment incomes, or both shown on your information slip(s) from EQUITABLE BANK (T5). Your revised investment income is $6,117."
I checked the my 2018 income tax return and verified that the T5 slip from EQUITABLE BANK with interest amount $1933.36 was included in the T1. The amount on Line 121 of my 2018 income tax return was $4,184 and the difference (6117 minus 4184) is $1933.
I called CRA, waited for 4 hours and finally spoke with 2 CRA agents. The recommendation was to send the relevant information to the Matching Program in Winnipeg Tax Centre for any correction.
Before embarking this process, I would like your your advice.
1. In addition to a covering letter, I am guessing the relevant information to send to CRA are as follows:
a. the printout that shows the entries for Line 121 which is "Interest, other investment income, and income from foreign sources". It does shows the entry T5 - EQUITABLE BANK $1,933
b. Since Line 121 includes "income from foreign sources, ...", I will also include the printout that shows the income.
Any other information will you recommend to attach to this request?
2. Is the Matching Program the correct department? And is the department in Winnipeg as I was told?
3. Can this process be done online as a dispute? or better with paper mail (covering letter, printouts)?
Coincidentally, I do not have outstanding tax oweing since my 2019 income tax refund cancelled out the 2018 extra tax.
Thanks for your advice,
I am not sure the matching department is the correct department, as we typically only deal with them when they send the original matching request, you have already been reassessed, but maybe that is where the CRA likes to process now, but that has not been my experience . I typically either file a T1 adjustment or notice of objection to Sudbury for my Ontario clients. You can do online or by paper but include the T5 in addition to the information you suggest. Good luck, it is going to take several months to resolve unfortunately. Please note I will not provide any follow up answers as I only provide direction and not specific personal advice.