CRA Penalties: When the Same Tax Mistake Repeats

A single missed slip can be an honest mistake. The problem is when that “one-time” mistake shows up again… and again… and again.

That’s the lesson behind a recent CRA-related court case highlighted by tax expert Jamie Golombek: the taxpayer repeatedly failed to report income, and the CRA applied penalties that can kick in when omissions are repeated over multiple years. If you’re thinking, “I’m not trying to cheat on my taxes,” you’re probably like most people. But the CRA doesn’t only look at intent—it also looks at patterns.

This matters more in late 2025 than it did a few years ago. Higher interest rates have made cash flow tighter. More Canadians have side income, gig work, online selling, or investment income. And when money is moving across multiple accounts, platforms, and slips, reporting errors become easier—and more expensive.

What the CRA penalizes: repeated unreported income

The core point: the CRA can penalize taxpayers who repeatedly omit income on their tax returns, even when each individual omission looks small. A repeated error starts to look less like a typo and more like a habit.

In cases like the one referenced in the RSS summary, the taxpayer’s issue wasn’t a one-off mismatch. It was the same type of income not being reported over multiple years. When that happens, the CRA has tools that go beyond simply reassessing your return and charging the tax owing.

The “pattern” problem (and why it changes the stakes)

Tax administration is partly about behavior. A single slip might be corrected with a reassessment plus arrears interest. But a repeated omission tells the CRA you’re not fixing the process that caused the error.

Practically, that’s what triggers a harsher response:

• It suggests you aren’t reviewing slips and statements carefully.
• It signals your record-keeping isn’t reliable.
• It raises the question of whether other income was missed too.

And once you’re in that zone, things can escalate from “pay what you owe” to “pay what you owe plus penalties.”

Common income types people “forget” to report

Most repeat-omission stories aren’t about someone hiding a salary. They’re about income that’s easy to mentally file as “extra.” For example:

• Investment income (T5 slips, interest, foreign income, reinvested distributions)
• Contract or gig income (no tax withheld, multiple platforms)
• Rental income (cash flow is obvious, but expenses and net income are messy)
• Self-employment income (especially when mixed with personal accounts)
• Employment income from short-term jobs (a T4 that arrives late or gets overlooked)

If you’ve had to juggle higher mortgage payments or bigger line-of-credit interest costs in 2025, it’s also more likely you’ve opened new accounts, moved money around, or started a side hustle—exactly the conditions that produce missed reporting.

How small errors snowball into big costs

Here’s the uncomfortable truth: tax mistakes compound the same way debt does—through time. And in an interest-rate environment where borrowing costs are still elevated compared with the ultra-low-rate era, the compounding effect hurts more.

When income is omitted repeatedly, the total bill can include:

1. The tax you should’ve paid (for each year)
2. Arrears interest (the CRA charges interest on overdue amounts)
3. Penalties (which are especially painful when they apply across multiple years)

A simple snowball example

Suppose someone forgets to report $3,000 of interest and side income each year. Maybe it’s a combination of a forgotten T5, a small consulting gig, and a platform payout.

• Year 1: you owe tax on $3,000.
• Year 2: you repeat the error. Now the CRA sees a pattern.
• Year 3: same thing.

Even if each year’s tax owing feels manageable, the combined tax + interest + penalties can turn a “small” omission into a multi-thousand-dollar problem.

This is where the story connects directly to banking and personal finance: when you get hit with a surprise CRA balance, people often pay it the fastest way possible—by drawing on:

• a line of credit,
• a credit card,
• or (worst case) missing other bills.

And if you’re carrying variable-rate debt, your CRA problem can quickly become an interest-rate problem.

One-liner worth keeping: A tax mistake that repeats becomes a cash-flow problem—and cash-flow problems get more expensive when rates are high.

Why repeated mistakes happen (and how to break the cycle)

The fastest way to avoid repeated failure to report income is to treat your taxes like a system, not a yearly event.

Most companies get this wrong with payroll and bookkeeping. Individuals do it too—just with smaller spreadsheets.

The three root causes I see most often

1) “Slip drift” across accounts and platforms
You open a new savings account for a promo rate. You buy a GIC. You move money to a different brokerage. You start selling online. Suddenly you have multiple T-slips and statements arriving in different formats.

2) One person does taxes, another person manages the money
In couples and families, one person may handle investing and side income while the other files the return. If the information handoff isn’t structured, something gets missed.

3) Tax-time stress and late filing behavior
When you’re rushing, you’re not reconciling. And when you’re not reconciling, you’re guessing.

A practical “anti-repeat” checklist (15 minutes a month)

If you want to avoid CRA penalties tied to repeated omissions, build a lightweight habit:

• Create an “Income Sources” list (one note on your phone works): employer(s), bank accounts, brokerages, side gigs, rental, foreign assets.
• Add every new account the day you open it. Don’t trust memory.
• Save tax documents as they arrive in one folder (digital is fine).
• Do a quarterly reality check: does your lifestyle/spending suggest income that isn’t showing up in your tax folder?
• Before filing: reconcile your list of income sources against slips and statements.

That last step is the killer feature. You’re not searching for slips; you’re confirming that each income source has been accounted for.

“If I made a mistake before, what should I do now?”

Direct answer: fix it before the CRA has to. Voluntary correction is almost always less painful than correction after a review begins.

If you suspect you’ve missed income in prior years:

1. Identify the years affected. Was it one year or multiple?
2. Quantify the income. Gather slips, bank statements, platform summaries.
3. Adjust the returns. Many corrections can be made through a formal adjustment process.
4. Plan for the cash flow hit. If you’ll owe tax, don’t wait until the notice arrives—set aside funds now.

The interest-rate angle: don’t finance CRA debt on a credit card

If you end up owing, how you pay matters—especially in an interest-rate-sensitive environment.

A few personal-finance rules of thumb:

• Avoid putting CRA balances on credit cards unless you can clear it immediately. Credit card interest is typically far higher than most alternatives.
• If you must borrow, compare a line of credit rate vs. other options, and weigh whether you can accelerate payments.
• Adjust withholding or instalments going forward so this doesn’t happen again. Repeating the same underpayment pattern is how people get stuck.

The goal isn’t just “get out of trouble.” It’s to stop the cycle that causes the trouble.

How to reduce reporting risk in 2026 (especially if rates stay higher)

If there’s one financial habit that protects you across taxes, banking, and debt management, it’s this: run your personal finances like a simple ledger.

When rates rise, the margin for error shrinks. A surprise tax bill competes with your mortgage, rent, and groceries. So your 2026 plan should be designed to reduce surprises.

Strong habits for accurate income reporting

• Separate accounts for side income (one checking account for revenue, one savings sub-account for taxes)
• Automate a “tax set-aside” transfer each time you’re paid (a fixed % works better than guesswork)
• Track investment income sources (especially if you hold ETFs, GIC ladders, or foreign investments)
• Keep receipts and documentation current if you’re self-employed or have rental income

The mindset shift that prevents repeat errors

Treat tax reporting like brushing your teeth: small, consistent maintenance beats emergency dentistry.

If you wait until April to discover what happened during the year, you’re relying on luck and memory. That’s fine—right up until it isn’t.

Next steps: make “repeat-proof” part of your financial plan

The CRA penalizing a taxpayer for repeated failure to report income isn’t just a tax story. It’s a personal finance story about systems, habits, and compounding consequences.

If you’re working through higher interest rates, mortgage renewals, or trying to pay down debt, the last thing you need is an avoidable CRA penalty landing like a surprise invoice.

Start with one action today: write down every place your income can come from—even if it’s small—and build your tax filing around that list. What would change in your finances next year if you eliminated “surprise” tax bills completely?