From October through March of each year, the Canada Revenue Agency compares information reported on your personal income tax return to information provided by third-party sources, such as employers and banks. If the numbers don’t match, you could be in for a nasty 20% penalty on the unreported income regardless of whether taxes are already withheld on the income. In addition, you still have to pay tax on the omitted income. This penalty applies if you have omitted income for two previous taxation years within a four-year period.
We have noted that the CRA has taken a very aggressive stance in assessing this penalty and that it is very difficult to argue against. Since CRA’s 2012 matching program has recently entered its “peak season”, please review the income reported on your 2012 income tax return and advise us if you have discovered any slips that were not provided to us when we prepared your return so that we can report the adjustment to the CRA before it reports it to you… Ugh!