Tackle Your 2017 Tax Slips to Avoid Penalties

Tackle Your 2017 Tax Slips to Avoid Penalties – An Accountant’s Viewpoint

This month marks the start of the annual Tax-slip “blitz.”

By the end of February, you can expect any employment and pension slips, including T4 and T4A slips, to be sent to you. This same deadline also applies to T5 slips which report investment income such as interest and dividends received from a corporation. If you wonder why you don’t get all of your slips at the same time, it is because slip providers have differing deadlines depending on their business structure and the type of income being reported.

Trusts and partnerships have a later deadline to report income to beneficiaries or partners. The deadline to report income from a trust (T3 slips) is 90 days after the trust’s year end, or March 31, 2018 for trusts with a 2017 calendar-year reporting period. March 31 falls on a Saturday this year. The Canada Revenue Agency (CRA) states that when the due date for filing a return falls on a Saturday, a Sunday, or a public holiday recognized by the CRA, the return is considered to be filed on time if it is sent on the next business day. As April 2 is Easter Monday, a public holiday recognized by the CRA, the federal deadline is April 3, 2018.

In general, partnerships must report partnership income to their partners on T5013 slips by March 31. As noted above, this filing deadline is also April 3, 2018, for 2017 calendar-year reporting.

Please note that Quebec does not generally follow the same conventions for an extended due date when the due date falls on a Saturday. Therefore, these deadlines remain March 31, 2018 for Quebec tax purposes.

While you may be tempted to simply set the tax slips aside until your annual trip to your tax return preparer’s office, you may want to consider resisting 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 are missing. Collecting and assembling your tax information can help you to ensure that all of your income-related information has 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 not only helps to ensure 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 in more than one year.

Specifically, if you fail to report an income amount of $500 or more on your 2017 tax return and have failed to report an income amount of $500 or more in any of 2014, 2015 or 2016, you will be assessed a repeated 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 2017; 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.

Note that for residents of Quebec, any provincial penalty will be separately assessed by Revenu Québec.

Dealing with missing slips

It is possible that information slips may be received late, or even not at all. When this occurs, there is an increased risk of unreported income and the application of the penalty for repeated failure to report income. Don’t let a third party’s oversight add to your tax bill. 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 2017 reporting year. Before filing, contact the issuer of any missing information slips or income receipts and request a duplicate.

If you will not be able to locate the necessary information in time to file by the deadline, you should estimate “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. Note that, 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.

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. As Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure.” Contact your accountant or myself if you have any questions regarding ‘slips”

 

Contributed by: Leanne McDougall,

Senior Manager, BDO Canada LLP

lmcdougall@bdo.ca|

 

This article has been carefully prepared and the information is correct as of January 31, 2018,

but it has been written in general terms and should be seen as broad guidance only.

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