Tax Slips and Income Reporting

If you’re T-slip is incorrect, or if you don’t receive one of the slips in the mail, who’s at fault? Point your finger at others all you want but CRA says that the responsibility is up to you.

Many Canadians blindly rely on their tax slips to report their income and that can be dangerous. At tax time, they gather up all of the T-slips that they’ve received in the mail and send them off to their tax professional or file their own taxes online. If a slip is missing or incorrect, the onus is on you to submit the correct information and the taxes owing on that income are still due.

This past summer, this exact case played out in Canada’s tax courts (Bolduc v The Queen, June 2017). A Quebec truck driver had worked for 5 different companies in 2013 and each of those firms issued him a T4 slip totaling roughly $40,000. In filing his 2013 return, this taxpayer reported gross income from employment of $16,577 from one of his 5 employers – the exact number that was on his T4 slip. That same company had their payroll audited by the CRA that year and they noticed from bank account statements that the company had paid this employee a total of $36,600 in wages that year.

Canadian companies must follow very strict rules for the issuance of T4 slips and the penalties for not filing them or filing them incorrectly are quite steep. Upon further investigation, the CRA found that this particular employer had issued incorrect T4 slips to 12 employees that year and they were no doubt in for some headaches of their own.

In court, the employee testified that since he worked for several employers, he relied on the T4s that he’d received to complete his tax return. But the reality was (and the courts confirmed) that the employee did in fact still earn that extra income and the taxes were still due.

A discrepancy on an investor’s T3 or T5 slip would be treated the same way – the investor will always owe the taxes due on any investment income, regardless of what errors or missing T-slips have occurred.

The takeaway from this should be that you are the only one that’s ultimately responsible for the amount of income you claim on your tax returns each year. Instead of blindly trusting the income reported on your T4 slip, take a minute to consider if it appears to be the correct amount. For investment income, reach out to your advisor to confirm that the amounts reported on your T3 and T5 slips are correct, and that you have all of the tax slips that you should have received.