Tax Tip Thursday

I thought I would share a court case where slips and autofill did not pan out for the tax payer.

This highlights the importance of knowing all your income!

Tax Court case illustrates the importance of tracking every tax slip

Everyone who has T4s or any kind of investment outside their RRSP and TFSA will want to pay attention to this week’s show!

This is one taxpayers story.

Like many of us, he did not get a lot of physical mail any more.  He had switched all bills, subscriptions and notably the Canada Revenue Agency to online.

So, of course, he gets an oversized, brown envelope from the CRA. Sure enough, his 2023 tax return was caught by the CRA’s matching program, which determined that he had “received investment income that appears to have been not fully reported.”.

The reason for the large brown envelope was because the CRA, along with its letter to me, had enclosed two legal-sized spreadsheet printouts containing summaries of all my 2023 T5 and T3 Slips reporting investment income.   Apparently, a slip from a secondary brokerage account had been omitted.

Under the Income Tax Act, if you fail to report at least $500 of income in a tax year and in any of the three preceding taxation years, you can be hit with a “repeated failure to report income” federal penalty.

This is calculated as the lesser of 10 per cent of the unreported income and 50 per cent of the difference between the understatement of tax (or the overstatement of tax credits) related to the omission, and the amount of any tax paid in respect of the unreported amount, for example, by an employer through source deductions withheld. A corresponding provincial 10 per cent penalty is also often assessed.

This led to him trying to figure out how it happened.

He had no physical slips matching the slip in question.  The slip was also NOT on his CRA account which is what get’s used for Autofill program, yet the CRA obviously had a record of receiving it, since it was picked up by its matching program.

Turns out, that the account at the brokerage was set up as online, so no slip was mailed out.

So the moral of the story is – you need to know what your income is, what slips you are expecting and make sure they arrive!

Investments tend to be the biggest issue, but if you move jobs quite a bit, then T4s can be problematic as well.

My suggestion for people with investments outside their RRSPs and TFSAs is to contact your investment advisor in late November or early December and review your account and review what income you can expect to hit your tax return for the year.

There could also be opportunities to take advantage of tax loss selling and actually LOWER your taxes!

Last but not least – be calm people, CRA is jamming all accountants up.  We can NOT even file a tax return if it was ready!  The CRA is saying end of the month or maybe 1^st week of April!

Autofill and the MYCRA accounts are NOT reliable right now.

We are processing as much as we can on people’s returns, but to avoid a situation (as outlined above), we are waiting until the end of the month to autofill people’s accounts.

We are not happy about any of this either!!!!!!

Let The Mad Accountant team take away your tax season stress!  Make An Appointment today!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.