- A knowing or grossly negligent omission can attract a penalty of the greater of $100 and 50% of the amounts calculated under s. 163(2).
- In an appeal involving a s. 163 penalty, the burden of establishing the facts that justify the penalty is on the Minister.
- Keeping good records, correcting errors early and asking for relief where it applies can limit the damage.
If you left income off your return in more than one year, or twice in the same period, how the CRA treats it depends on the facts of each return and on the penalty rules that apply.
This article explains the penalty framework that applies to omitted income, how time limits and interest work, and what you can do. Because the rules on a repeat-omission penalty turn on specific details of each year, confirm them with a lawyer or accountant before relying on any figure you have seen online.
This article covers Canadian federal tax law, which applies in every province.
Omitted income and the penalties that can apply
A person who knowingly, or in circumstances amounting to gross negligence, makes or takes part in a false statement or omission in a return is liable to a penalty. That penalty is the greater of $100 and 50% of the total of the amounts calculated under paragraphs (a) to (i) of s. 163(2).
In an appeal involving a penalty under s. 163, the Minister has the burden of establishing the facts that justify it. A separate rule sets the penalty for false renunciation statements at 25% of the excess of the renounced amount over the amount the corporation could renounce.
Whether a repeat-omission penalty applies, and how it is calculated, depends on what was omitted in each year and when. A lawyer or accountant can review your returns and confirm.
How far back the CRA can reassess
| Situation | Time limit |
|---|---|
| Individual, normal case | Three years after the earlier of the original notice of assessment and the original notification that no tax is payable |
| Mutual fund trust or non-CCPC corporation | Four years |
| Misrepresentation from neglect, carelessness or wilful default, or fraud | No fixed time limit |
| Valid waiver filed in the normal period | Only for the matters the waiver specifies |
When the CRA reassesses outside the normal period because of misrepresentation, fraud or a waiver, it may do so only to the extent the reassessment relates to the matter that triggered the exception. If the CRA says a misrepresentation occurred, it must establish it in an appeal.
Interest and relief
Interest runs on unpaid tax at the prescribed rate while the amount is outstanding. The rate for 1 October to 31 December 2026 is 7%, and it is reset every quarter.
The CRA may cancel or waive penalties and interest. Among the factors it weighs are your compliance history, whether you knowingly left a balance outstanding, whether you took reasonable care, and whether you acted quickly to fix the omission. A repeated omission can therefore weigh against you, which is one reason prompt correction matters.
A relief request is made on Form RC4288 or by letter, and you should include all the circumstances you rely on, with supporting documents, in the first request. There is no right of objection or appeal from a relief decision, but you can ask for a second administrative review or apply to the Federal Court for judicial review within 30 days of the notice of decision.
Disputing an assessment
An individual who disagrees with an assessment must serve a notice of objection by the later of one year after the filing-due date and 90 days after the notice of assessment was sent. The Minister must then reconsider and notify you in writing.
If the objection does not resolve things, you may appeal to the Tax Court of Canada within 90 days of the notice of confirmation or reassessment. For most assessments, the CRA generally may not take listed collection steps until 90 days after the notice of assessment was sent, and a filed objection bars collection of the disputed amount for a further period. Interest still accrues on disputed amounts.
What to do next
- List every year in which income was omitted and what was left out.
- Gather slips, bank statements, invoices and contracts for those years; books and records must generally be kept for a minimum of six years.
- Keep clear records going forward so the same omission does not recur.
- Get advice from a lawyer or accountant on how to correct the returns and what penalty exposure you have.
- Calendar every deadline on any CRA notice, especially the objection period.
Frequently asked questions
Is there a penalty if I omitted income twice?
Penalties can apply to omissions, and the gross negligence penalty is the greater of $100 and 50% of the amounts calculated under s. 163(2). How a repeat omission is treated depends on the details of each year, so have a lawyer or accountant check your returns.
How far back can the CRA reassess a return?
For an individual, the normal reassessment period ends three years after the earlier of the date of the original notice of assessment and the date of the original notification that no tax is payable. It can go further back where there was a misrepresentation from neglect, carelessness or wilful default, or fraud.
Does the CRA have to prove a penalty?
In an appeal involving a s. 163 penalty, the burden of establishing the facts justifying it is on the Minister. You should still keep records, because the amount of tax is a separate question.
Can I ask for the penalty to be cancelled?
Yes, the CRA may cancel or waive penalties and interest, and it considers factors such as compliance history and reasonable care. A request is not guaranteed to succeed.
Sources
- CRA Information Circular IC75-7R3, Reassessment of a Return of Income — canada.ca
- Income Tax Act, s. 152(4)(a)(i) — Justice Laws (federal)
- CRA Income Tax Audit Manual, chapter 11 — canada.ca
- CRA RC4188, What you should know about audits — canada.ca
- CRA, Taxpayer Bill of Rights — canada.ca
- Income Tax Act, s. 163(2) — Justice Laws (federal)
- CRA, Prescribed interest rates, Q4 2026 — canada.ca
- CRA IC07-1R1, Taxpayer Relief Provisions — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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