How Do I Fix Mistakes on Past Tax Returns?
One of the most common questions we get asked is how to fix mistakes on past or previous tax returns. It’s an issue that is definitely worth exploring to ensure you’ve received the maximum available return and to avoid problems, especially if you’ve discovered new information that would make what you have filed previously incorrect or inaccurate. It’s best to look into the issue as soon as possible and not wait to see if Canada Revenue discovers your error.
If Canada Revenue does discover an error they may change or reassess your return, asking you to pay the difference. They may also choose to levy a gross negligence penalty on the amount. A gross negligence penalty or a ‘False Statements or Omissions’ penalty is equal to roughly 50% of the tax difference. This could be a sizeable amount if you forgot to include an income of several thousand dollars on a previous year’s tax return!
Canada Revenue has a ‘Voluntary Disclosure‘ process for taxpayers to follow in the event that a mistake is identified. Essentially, this means filling out a form in which you disclose the error or omission from a previous year’s return. It is very important that you file this before the CRA discovers the problem and contacts you to begin an investigation into the error or omission. This is a great second chance on past year’s taxes if new information comes to light and it becomes known to you that a previous year’s taxes were incorrect as filed.
If you believe you may want to use this program then you should speak to a professional accountant to discuss the details of your specific situation.
Contact us to learn more about fixing mistakes on past tax returns.