What Happens If You Forget To Report Income On Your Tax Returns
Forgetting to report income is a common issue pertaining to tax returns and audits. If you are reporting numerous employment incomes, have a plethora of stocks that have done well, and are putting a percentage of your income into an RRSP – that’s a lot of T slips to account for. The Canadian Revenue Agency operates on the honour system, which means they expect you will follow through with your tax obligations each year.
Hard penalties will be levied for negligence if the CRA finds you have not reported taxes on time. First time offenders are hit with a fee of 5% of the outstanding balance, plus a monthly 1% payment of the balance owed until it is paid off.
The second time you forget to report income (within a four-year period), the CRA will charge you a 10% additional tax on the unreported income. So if you do not file a $2,000 freelance video gig as income, and the CRA takes notice in an audit, they will tax you for $200. Tack onto this fee a provincial tax of 10% on the same income, and you are down $400 out of your $2,000 income. The CRA will go to great lengths to get taxes from you and your business, but at least there are tax lawyers who will take your side.
The CRA does offer a voluntary disclosure program, in which you can let them know about your forgotten income amounts. It’s a great opportunity to avoid paying an excessive penalty. It can be done by mail or via your portal on the CRA website. There is also a taxpayer relief program for those who cannot afford the excessive penalties. Like the voluntary disclosure program, the taxpayer relief program should be looked over with a tax lawyer.
If you are unsure about your tax status and have yet to be audited, it’s advisable to contact a tax lawyer to ensure all earnings are properly reported.
**Disclaimer
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.
