February is a great month to start getting organized in advance of the April 30 deadline for filing personal income tax returns with the Canada Revenue Agency (CRA). Even if you or your spouse are self-employed and have a June 15 filing deadline, taxes owed are still due on April 30. Getting on top of your taxes early will be of great help to you for avoiding unnecessary frustration and/or painful penalties.
When to expect your tax slips
- Reporting entities must send certain tax slips by February 28, 2021 for income earned in 2020: T4 employment income slips, T4A pension income slips, and T5 for investment income.
- If you received any taxable COVID-19 benefits, the CRA will provide a T4A slip, which you should receive before March 10, reporting the amounts. Note that if you’ve applied for a COVID-19 benefit with Service Canada, you will receive a T4E slip instead of a T4A slip.
- Trusts have a deadline of 90 days after the trust’s year-end to report income to beneficiaries on T3 slips. As such, trusts with a 2020 calendar-year reporting period have until March 31.
- Partnerships generally must report partnership income to their partners on T5013 slips by March 31 as well.
What to do with your tax slips
The differing deadlines means it is likely you will still be getting slips in April, and you may be inclined to simply set them aside until you’re ready to sit down with your tax return preparer.
Reject that inclination and take a more organized and itemized approach.
A written checklist or personal tax organizer can keep track of the slips and receipts you’re expecting and receive, and it can help you identify anything that may be missing.
Also, assembling your slips and information will make it easier to verify accuracy and catch any omissions; for example, you notice incorrect amounts reported on your T4A slip from the CRA or you received a T4A slip for COVID-19 benefits but never applied. In these cases, CRA requests that you call them right away to resolve the issue.
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 avoid the penalty for failing to report income.
Specifically, if you fail to report an income amount of $500 or more on your 2020 tax return and have failed to report an income amount of $500 or more in any of 2017, 2018, or 2019, 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 2020; 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 associated penalties for repeated failure to report income.
The CRA will not automatically waive penalties for late or inaccurate filing because of missing slips.
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 2020 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 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, 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 confirmed.
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, 2021.
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.