163(1) Repeated Failure to Report Penalty Upheld

In the recent decision in Polubiec (2019 TCC 146), the Tax Court of Canada upheld the assessment of approximately $140,000 in penalties under the repeated failure to report income penalty under s. 163(1) of the Income Tax Act (Canada). In the specific case, the unreported amounts related to investment income and a withdrawal from the taxpayer’s RRSP.

In all cases, the unreported amounts were reported to the CRA by virtue of the withholding and information return requirements under the Act (i.e. T3, T4RSP and T5 slips). Additionally, in respect of the RRSP withdrawal, income tax had been withheld at source and remitted. However, the court held that because these amounts were not reported by the taxpayer in his return, they were not reported for the purposes of s.163(1) of the Income Tax Act.

The decision in Polubiec is a reminder of the strict onus placed on taxpayers to report all of their income and the harsh penalties that can apply in the event of technical non-compliance.

Prepared by: Ian Humphries

Ian Humphries is a partner working out of the Vancouver office of Thorsteinssons LLP. Ian joined Thorsteinssons after articling and practicing securities law at a national law firm. Prior to law school, Ian worked as an investment banker in the… more »