The pandemic that has stricken Canada along with many other parts of the world had caused financial turmoil for a lot of people. While most Canadians have filed their taxes a lot did so in a rushed way as they had so many other things on their mind. This raises the question were any mistakes made that could cost the taxpayer later on. Usually, once an individual has completed their taxes they don’t want to think about them until the next tax season. It may be worth double checking your tax filings for 2019 especially if you didn’t have a professional do them for you.
A Common Mistake
A common mistake that a lot of people make is not reporting all their income. This is usually an error although there are a few that do this intentionally, thinking that the CRA won’t catch up with them. In any event not reporting income can be a costly mistake.
The Repeated Failure To Report Income Penalty
If in a tax year you did not report a minimum of $500 of income and you made the same mistake in the three preceding years of your tax filings then this puts you into the category of repeated failure to report income. This comes with a penalty. The penalty can be a little complex to understand….
It can be the lessor 10% of the unreported income plus 50% of the difference between the understatement of tax or the overstatement or tax credits. All of this is as it relates to the amount of income that you failed to claim. Plus you will owe the original tax on the amount that was omitted. To understand this law in detail check out what the government has to say about it.
Making False Statements
Make no mistake about how important it is to be truthful on your tax filings. Omitting to claim income is one mistake but another is making a false statement. This too comes with a penalty. It can be
The great of $100 and 50% of the understatement or overstatement of credits that relate to what the false statement or omission was. If you have made a habit of failing to report income you will end up paying a 10% federal penalty and a 10% provincial penalty on the unreported amount.
Coming Clean
If you realize that you have not claimed an income amount or you made a false statement you need to correct this. It can be done through voluntary disclosure. You might get a penalty break of some kind if you do this. To capitalize on this you must…
- Be the one to bring it to the attention of the CRA, and not wait till they come to you about it.
- The new information you are providing must be complete and all information relating to it submitted.
- You must be a risk of a penalty in the first place to be eligible for a possible waiver of some of the penalties.
- The information that is outstanding must more than one year overdue.
If you think you have made a mistake with your tax filling contact us here at 416-398-1700. We would be glad to help you get this sorted out.
