While the April 30 deadline for filing personal income tax returns may seem far away, February is actually a great month to start getting organized for the upcoming tax season. Even if you or your spouse are self-employed and have a June 15 filing deadline, you should remember that any taxes owing are still due on April 30 so staying on top of your tax slips early in the process can prevent unnecessary frustration as the due date nears.
February is when certain tax slips, such as T4 employment income slips, T4A pension income slips, and T5 investment income slips are sent to you. All of these slips must be sent to you by the reporting entity by February 29, 2020, for income earned in 2019.
Trusts and partnerships have later deadlines to report income to beneficiaries or partners. The deadline for a trust to report income to its beneficiaries on T3 slips is 90 days after the trust's year- end, or March 30, 2020, for trusts with a 2019 calendar-year reporting period. Similarly, partnerships generally must report partnership income to their partners on T5013 slips by March 31 of the calendar year that follows the fiscal year of the partnership.
Because of the differing deadlines that reporting entities have for sending out tax slips, you will likely still be getting slips in April. While you may be tempted to simply set the tax slips aside until your annual trip to your tax-return preparers' office, we suggest that you resist the urge to stockpile your slips and receipts in favour of a more organized and itemized approach. A written checklist or personal tax organizer can help you keep track of the information slips and income receipts you are expecting and identify whether any of these items are missing. Collecting and assembling your tax information can help you to ensure that all of your income-related information slips have been received, thereby preventing any omissions in reporting income for the year.
Penalties for not reporting income
Tax slips help you make certain that all sources of income are reported each year. This helps to ensure that you pay the appropriate amount of tax and avoid interest on underpaid tax. It also helps you to avoid the penalty for failing to report income.
Specifically, if you fail to report an income amount of $500 or more on your 2019 tax return and have failed to report an income amount of $500 or more in any of 2016, 2017, or 2018, you will be assessed a failure-to-report income penalty.
The federal and provincial or territorial penalties are each equal to the lesser of:
- 10% of the amount you failed to report on your return for 2019; and
- 50% of the difference between the understated tax (and/or overstated credits) related to the amount you failed to report and the amount of tax withheld related to the amount you failed to report.
Revenu Québec separately assesses Quebec tax penalties.
Dealing with missing slips
Information slips may be received late—or even not at all. When this occurs, there is an increased risk of unreported income and the consequent application of the penalty for repeated failure to report income. If you are required to file a tax return, be sure to file on time to avoid any late-filing penalties, even if you haven't received all of your tax information slips or receipts for the 2019 reporting year. Before filing, contact the issuer of any missing information slips or income receipts and request a duplicate. If you are a registered user of the My Account service offered by the Canada Revenue Agency (CRA), you may be able to view your tax slips online and save yourself some time.
If you will not be able to locate the necessary information in time to file by the deadline, you should estimate the missing income amounts to the best of your ability. Supporting documents, such as pay stubs or account statements, may aid in this regard. Be sure to retain your supporting information in case the CRA requests to see it. If necessary, you can request an adjustment to your tax return once the actual slips or receipts are received and the amount of income is known with certainty.
Don't let a third party's oversight add to your tax bill. Taking the time to manage and collect all of your information slips and income receipts before preparing and filing your income tax return can help you avoid paying unnecessary taxes, interest, and penalties. Contact your BDO advisor for answers to other questions about your tax reporting.
The information in this publication is current as of January 12, 2020.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.