Taxpayer Fights CRA Over Omitted Income in Unusual Tax Case

A Quebec taxpayer recently found himself embroiled in a battle with the Canada Revenue Agency (CRA) over omitted income in a peculiar tax case that highlights the challenges of relying solely on online tax information. The taxpayer had filed his 2019 tax return using the TurboTax software, utilizing the CRA’s Auto-fill feature to gather tax information from his CRA My Account. However, he later discovered that certain substantial T5 slips from the Royal Bank of Canada were missing from his account.

Despite having confirmed that all the T3 and T5 slips in his CRA My Account matched the data he used to file his return, the taxpayer was shocked to receive an “unreported income letter” from the CRA in December 2021, indicating that he had failed to report investment income from the omitted T5 slips. The missing income, amounting to over $70,000, had accumulated over a decade in an investment account and became taxable in 2019 due to a legislative change.

Upon receiving the CRA’s reassessment in June 2022, which included the omitted income and hefty arrears interest, the taxpayer immediately sought relief. His attempts to explain that the missing T5 slips were not posted in his CRA My Account during the filing period were initially rejected by the CRA. Subsequent appeals led to the Federal Court getting involved to review the situation.

In a rare move, the Federal Court deemed the CRA’s decision not to cancel the arrears interest as unreasonable, considering the exceptional circumstances of the early months of the pandemic when the taxpayer had limited access to physical tax slips. The judge ordered a reevaluation of the case by a different CRA officer to take into account the agency’s oversight of not posting the T5 slips in a timely manner on the taxpayer’s account.