What are the potential penalties for failing to report T slip income?

Failing to report T slip income to the Canada Revenue Agency (CRA) can result in significant penalties, including fines and interest charges on unpaid taxes. In more serious instances, it could lead to criminal prosecution for tax evasion. Proactive disclosure is generally the best way to address unreported T slip income.

What is the process for rectifying unreported T slip income?

To rectify unreported T slip income, you can utilize the Canada Revenue Agency's (CRA) Voluntary Disclosures Program (VDP). This program enables taxpayers to proactively correct errors or omissions in their tax filings, which may help them avoid penalties and prosecution.

Is it necessary to report every T slip to the CRA, regardless of the income amount?

Yes, it is necessary to report all T slip income to the Canada Revenue Agency (CRA), even for small amounts. The CRA receives copies of these slips directly from the issuing organizations, which allows them to easily identify any discrepancies if you omit reporting them.

Which income sources are commonly documented on T slips?

T slips document various income sources, including employment income (T4), investment income (T3, T5), and pension income (T4A). Accurately reporting all types of T slip income helps avoid issues with the Canada Revenue Agency.

Unreported T Slip Income: What You Need to Know

Address unreported t slip income proactively to avoid CRA penalties. Learn the consequences of not reporting income and how to rectify the situation.

Regardless of the reason, if you have unreported T-slip income of $500 or more from any T-slips in your current year tax return, don’t wait for CRA to catch it.

If you have unreported t-slip income in your current year return and also unreported t-slip income in any of the three years prior, you are subject to a penalty equal to the lesser of:

20% of the unreported income amount (10% federally and 10% provincially) or
the tax payable from that t-slip less the income tax deducted on the t-slip multiplied by 50%.

Let’s take a look at an example.

Say you missed a slip that had 20,000 of earnings on it. Let’s assume this is all still in the first tax bracket, 15% marginal tax rate.

10% of the unreported amount is $2,000. Yikes!
But, it’s the lesser of that, or 50% of the tax liability. So assuming that no tax was taken off that’s only $1,500 (20,000 * 15% * 50%). A bit better!
But this 20,000 slip is a T4, and it did have some source deductions on it – $2,000, in fact. That’ll bring that penalty down to $500 (20,000 * 15% = 3,000 – 2,000 = 1,000 * 50% = 500). Not ideal, but much better than our first two scenarios.

Also note that these penalties only apply if the unreported income is occurring for a second time in a four-year period. So be sure to do your best to keep track of all of your T-slips to avoid having to pay any unnecessary penalties.

It can be difficult to keep track of all T-slips, especially since they can be issued at various times throughout the year, and you may receive many different slips based on the number and type and investments you have. The number of T-slips you receive each year may also be different. However, Canada Revenue Agency receives copies of all T-slips issued to you, and verifies all income reported on the tax return to that on all of the T-slips, through a matching system.

Your due diligence is your best defense in this situation. For example, if you are unsure whether you have received all of your T-slips for the year, make sure you follow-up with relevant individuals/institutions (e.g. accountant, banks, investment advisor, employers, etc.), or call Canada Revenue Agency to verify which T-slips they have received.

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