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With the 2025 tax season now behind us, it may be worth your time over the summer months to log in to your Canada Revenue Agency account to view all of the 2025 T-slips that the CRA has on file for you to ensure that you’ve fully captured, and reported, all of your income for 2025. This is particularly important for those who filed early, especially if you used CRA’s auto-fill feature before all your slips showed up online. The goal is to catch any income omissions and adjust your return, before the agency catches you in CRA’s annual matching program.

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Failure to report income, even if it’s the result of a purely innocent mistake, can give rise to penalties and interest. That’s what happened to one taxpayer who appeared before the federal court in Vancouver in late May, seeking a judicial review of a decision of the CRA denying her request for relief from penalties and interest.

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Before delving into the facts of the case, let’s review the rules for omitting income. Under the Income Tax Act, if you fail to report at least $500 of income in a tax year, and in any of the three preceding taxation years, you can be hit with a “repeated failure to report income” federal penalty. This is calculated as the lesser of 10 per cent of the unreported income, and 50 per cent 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, for example, by an employer through source deductions withheld. A corresponding provincial 10 per cent penalty is also often assessed.

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For example, if you forgot to report more than $500 of income you received in 2025, and also forgot to report more than $500 in income in any of your 2022, 2023 or 2024 returns, you can be hit with this failure-to-report penalty.

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In the recent case, the taxpayer filed her 2021 income tax return in early March 2022. She failed to include two T5 slips from TD Waterhouse and Equitable Bank that she says she received only after she had filed her return. Upon noticing this omission, the CRA reassessed her but did not impose a penalty.

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Unfortunately, a similar situation arose in 2023 when the taxpayer filed her 2022 income tax return in late March 2023, but inadvertently omitted T5 slips from TD Waterhouse, claiming the slips were not available on the CRA’s auto-fill service when she used commercial software to prepare her return. For the 2022 tax year, her undeclared income was more than $23,000. She was therefore reassessed by the CRA in October 2023, and a penalty of $2,925 was applied, along with $636 in non-deductible arrears interest.

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After receiving her reassessment notice, with the penalty and interest, the taxpayer applied to the CRA under the taxpayer relief provisions of the Act. Three successive decisions were made, by different CRA officers, denying her request for relief. The recent judicial review surrounded the third decision in which the CRA officer had noted that the agency had received the omitted slips before the end of February 2023. It had processed them in April 2023, so that they would have been available to the taxpayer before the deadline to file her 2022 income tax return, being April 30, 2023.