06 Mar REPEATED FAILURE TO REPORT INCOME MAY RESULT IN A LARGE PENALTY
Currently, a taxpayer (including individuals, corporations and trusts) may be assessed a repeated failure to report income penalty of 10% of the unreported amount of income for a second or subsequent failure to report income on a tax return that occurs within a four-year period.
For 2015 and subsequent tax years, the penalty would only apply where the amount of unreported income by the taxpayer is $500 or more. The budget also proposes changes to the penalty calculation. Under these changes, the amount of the penalty will be the lesser of 10% of the amount of unreported income; and
an amount equal to 50% 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.
Greg failed to report interest income of $10,000 on both his 2015 and 2016 Personal Income Tax return (T1). Since this was his second failure to report income within the four year window, a penalty of $1,000 plus a provincial/territorial penalty of $1,000 are assessed.
This publication is produced by Andrews & Co. as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors.
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