What Is the Penalty for Failing to Report Income on a Tax Return in Canada?

This answer covers Canadian federal tax law, which applies in every province.

If you leave income off your return, you can owe the tax, interest and possibly a penalty. The gross negligence penalty applies to a person who knowingly, or in circumstances amounting to gross negligence, makes or takes part in a false statement or omission in a return, and it is the greater of $100 and 50% of the total of the amounts calculated under paragraphs (a) to (i).

In an appeal involving a penalty, the burden of establishing the facts that justify it is on the Minister. Unpaid tax also carries interest at the prescribed rate, which is 7% on overdue income tax for 1 October to 31 December 2026 and is set quarterly.

Acting quickly matters. When the CRA considers relief from penalties and interest, it weighs your compliance history, whether you used reasonable care and whether you acted quickly to fix the omission. A penalty relief request generally must be made within 10 years of the end of the calendar year of the tax year. Whether a penalty applies to you depends on the facts, so a lawyer or accountant can confirm before you file a correction.