CRA Penalties for Not Reporting Income
The Canada Revenue Agency (CRA) expects that people report all of the income they earn on their income tax returns. If you forget to report some income there are significant penalties that you are risking. If you are faced with CRA penalties for not reporting income, Farber Tax can assist you. Contact us today!
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What are the CRA Penalties for Not Reporting Income?
Unreported income is serious. The Canada Revenue Agency (CRA) expects that people report all of the income they earn on their income tax returns. If you forget to report some income (or if you purposely fail to report income) there are significant penalties that you are risking.
The CRA has multiple ways to determine if all income was reported. For instance, it can compare your income level with others who live in the same neighborhood or who own similar assets. If the agency believes your income is not high enough to live where you live and own what you do, it can request an audit.
The agency can also audit your bank account to determine if you made significant cash deposits that it might consider as income.
The CRA also participates in a “matching program” where it compares the information provided by taxpayers to the details given by third parties, such as financial institutions, employers, and agencies such as PayPal. If there is a discrepancy between these numbers and the numbers you provided on your tax return, you could find yourself facing CRA penalties for not reporting income.
Details on the CRA Penalties for Not Reporting Income
The CRA charges compound daily interest starting May 1st on any unpaid amounts owing for the previous year. This includes returns that are reassessed. Therefore, if the CRA reassesses your return, determines that you did not declare all your income correctly, and determines that you owe money, it immediately charges interest back to May 1st. This can be a significant amount.
If you fail to report income on your return more than once in a four-year period, you could be charged with additional CRA penalties for not reporting income, specifically the repeated failure to report income penalty.
This means that you will be required to pay federal and provincial or territorial penalties, which are each equal to the lesser of:
- 10% of the amount you failed to report on your return for 2018
- 50% of the difference between the understated tax related to the amount you failed to report and the amount of tax withheld related to the amount you failed to report
What You Can Do
If you realize that you did not report all income on your tax return, the Voluntary Disclosure Program (VDP) could be a good option for you. This program is designed to be a “second chance” for those who do not file their income taxes correctly (or who do not file returns that they should have filed). If your VDP application is accepted by the CRA, you will be eligible for relief from prosecution and, in some cases, from penalties and interest that you would otherwise be required to pay.
If you are considering filing a VDP application, contact the experienced team at Farber Tax Solutions. To be eligible for the program, your disclosure must be voluntary. Therefore, you will need to give the CRA information that it does not currently have. This means that it is important to use care. If you provide the CRA with important details and are not accepted into the program, you could face very stiff penalties. Our team can help you prepare your application, giving you the best chance of success.
If you are faced with CRA penalties for not reporting income, we can assist you as well. Our team of ex-CRA professionals, working in affiliation with tax lawyers from Farber Tax Law who know how to successfully navigate CRA processes, communicate and negotiate with the CRA, and resolve your tax issues. Contact us today for more information.
Farber Tax Solutions Helps You at Every Step of the Way including:
- 1| Organizing: We analyze all documents and communication, to fight the CRA on your behalf
- 2| Audits: We assist you with audits and ensure proper conduct by tax authorities
- 3| Appeals: We can prepare a Notice of Objection, clarifying your standing with the CRA
- 4| Litigation: We represent you at all levels of court