February is a great month to organize in advance of the April 30 deadline for filing personal income tax returns. Even if you 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 help to you avoid unnecessary frustration and/or penalties.
When to expect your tax slips
- Reporting entities must send certain tax slips by February 28, 2021 for income earned in 2020 including T4s, T4As and T5s.
- 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.
- If you’ve applied for a COVID-19 benefit with Service Canada, you will receive a T4E slip instead of a T4A slip.
- Trusts report income to beneficiaries on T3 slips and until March 31.
- Partnerships that income to their partners on T5013 slips have until March 31 as well.
What to do with your tax slips
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.
Penalties for not reporting income
Tax slips help you make certain that all sources of income are reported each year. If a 2020 personal tax return fails to report an income amount of $500 or more and has also failed to report an income amount of $500 or more in any of 2017, 2018, or 2019, that individual will be assessed a failure-to-report income penalty.
The federal and provincial or territorial penalties are each equal to the lesser of:
- 10 per cent of the amount you failed to report on your return for 2020; and
- 50 per cent 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.
Dealing with missing slips
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. 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.
Scott Conner is an experienced tax practitioner and practical problem solver at BDO. As a partner specializing in Canadian income tax, Scott has particular specialties in private companies, planning for estates, trusts, and complex transactions. As personal tax season approaches, Scott and his team understand personal taxes are as individual as clients themselves. BDO works closely with their clients to understand their specific needs and adjust strategies accordingly. BDO partners and staff take a proactive, hands-on approach. They closely follow existing and proposed legislation to determine how it will affect individual financial goals, and provide ongoing guidance.