Laura Chen was 34, a CPA working in tax compliance for a mid-sized firm in Vancouver, when she filed her 2019 return. She reported her T4 salary of $83,000. She did not report the $2,140 she had earned from part-time contract work that year, work she'd done on weekends for two small clients her firm didn't serve. The amount had come in on a T4A slip that arrived late, after she'd already filed. She saw it in June, registered that it was small, and decided she'd add it next year as a prior-period adjustment if the CRA flagged it. They didn't. She moved on.

In 2022, she did it again. This time it was a $1,870 T5 slip from a brokerage account she'd opened to hold some mutual funds her parents had gifted her. The slip showed up in March, a week after she'd filed. Same calculation as before: small amount, low tax bracket, she'd deal with it if the system caught it. The system did catch it. And this time, the CRA assessed her under subsection 163(1) of the Income Tax Act, the "repeated failure to report income" provision. Because she had failed to report an amount in 2019 and again in 2022, and 2022 fell within the three-year window following 2019, the penalty applied automatically. The penalty was calculated as the lesser of 10% of the unreported amount or 50% of the difference between the understated tax and any tax withheld. In her case, the combined federal and provincial penalty came to $374, roughly double the actual tax she would have owed on that income in the first place.

Why the second miss triggered the penalty

The CRA's matching system flags omissions in real time. Employers and financial institutions file information slips electronically, and the agency's algorithms cross-check them against filed returns within weeks. The first omission generates a reassessment and a warning. The second omission, when it occurs in a tax year and the taxpayer also failed to report income in one of the three preceding tax years, triggers the strict liability penalty under 163(1). The taxpayer does not need to have intended to hide the income. The penalty is automatic if two omissions occur in that window and each unreported amount is $500 or more.

Chen argued that both omissions were inadvertent, that she had simply filed before the slips arrived and then forgotten to amend. The Tax Court acknowledged her explanation but noted that as a CPA specializing in tax compliance, she was expected to maintain systems that would prevent exactly this kind of error. The court cited Canada v. Adibi, in which the Federal Court of Appeal held that professional designation raises the standard: a tax professional cannot claim "oversight" as easily as a layperson. Chen's own expertise became evidence against her due diligence defense.

The math that surprised her

Chen had assumed the penalty, if it came, would be tied to the tax she owed. It wasn't that simple. For 2015 and later tax years, the penalty is calculated as the lesser of 10% of the unreported income or 50% of the difference between the understated tax and any tax withheld. In her case, the actual tax on $1,870 at her marginal rate would have been about $560. The penalty for failing to report it twice was $374. Add interest, and the cost of the second slip was higher than if she'd just reported it.

She paid the penalty in full. She requested Taxpayer Relief, citing her clean history and the modest dollar figures, but relief is generally reserved for extraordinary circumstances, illness, disaster, CRA processing errors. Forgetting a slip twice does not qualify. The relief request was denied in November 2023.

Chen now sets a calendar reminder for April 30 and doesn't file until she's confirmed every expected slip has arrived. Her firm uses her case in internal training when onboarding junior staff.