From: AlanBaggett@volcanomail.com   
      
   Why relying on your T4 slips to calculate income could be a big tax mistake     
   : CRA SOTW   
      
   While most of us don’t give our tax reporting slips a second thought, issues   
   regarding an incorrect T4 slip do come up   
      
   By Jamie Golombek   
      
   If you’re an employee, it’s reasonable to assume that the total amount you   
   received as pay during the year, including the value of any bonus or taxable   
   benefits, is properly reflected on your T4 tax slip issued by your employer   
   following the end of    
   each calendar year. But, what if your employer makes a mistake and omits some   
   of the income it paid you from the total employment income on your T4 slip?   
   Are you still responsible for the tax owing? What about any arrears interest   
   charged on the income    
   not reported?   
      
   While most of us don’t give our tax reporting slips a second thought, filing   
   them away in a drawer until it’s time to prepare our tax return, the issues   
   regarding an incorrect T4 slip and the taxpayer’s responsibility came before   
   the Tax Court    
   recently in the case of a Quebec truck driver.   
      
   The T4 slip, known formally as the “Statement of Remuneration Paid,” is   
   one of numerous tax reporting slips that a payor is legally required to   
   complete to report income and various other amounts such as tax withheld, when   
   amounts are paid to    
   employees or other recipients. The rules surrounding the preparation of the   
   slips are strict, the deadlines are tight and the penalties for not filing or   
   filing incorrect slips are severe. Yet, mistakes do happen.   
      
   In the case before the court, the taxpayer worked for five different companies   
   in 2013, each of which issued a T4 slip reporting, in total, about $40,000 of   
   employment income before any deductions withheld at source.   
      
   In filing his 2013 return, the taxpayer reported gross income from employment   
   of $16,577 from one of the companies but when that corporation’s payroll   
   accounts were audited by the Canada Revenue Agency, it turned out that the   
   company’s “wage book    
   was insufficient” and that a gross salary of $7,994 had been omitted from   
   the T4 slip issued to the employee and was consequently not reported on the   
   employee’s 2013 tax return.   
      
   The CRA performed an analysis of the taxpayer’s 2013 bank account statements   
   which revealed deposits totaling approximately $36,600 of wages. The taxpayer   
   testified that the only T4 he had received from that company for the 2013   
   taxation year was for $   
   16,577 and he included this amount in his 2013 income. He stated that he never   
   received an amended T4 from the company that took into account the additional   
   $7,994 in employment income.   
      
   The CRA representative testified the corporation’s accounting records were   
   “weak and non-existent for one period in 2013.” She contacted the   
   company’s accountant, but even he mentioned that he had difficulty obtaining   
   information from his client.   
      
   The CRA auditor compared the cheques issued to the employees against the wage   
   book and noted that the total amount of the cheques issued to employees   
   exceeded the total of the wages entered in the wage book and, consequently, on   
   the T4s prepared by the    
   accountant. As it turned out, the T4s for twelve employees did not match the   
   amounts on the cheques issued by company for the 2013 taxation year.   
      
   Upon noticing the discrepancy, the CRA auditor sent written notification to   
   the company’s owner inquiring about the difference between the total amounts   
   of the cheques issued to certain employees and the total wages entered in the   
   wage book and    
   requested that the owner contact her to discuss the situation.   
      
   The owner never replied to the CRA’s request and, as a result, the CRA   
   amended the T4s of the twelve employees with deficient T4 slips. The taxpayer   
   was one of these twelve employees.   
      
   The CRA sent the company the amended T4s for the twelve employees and it was   
   then the company’s responsibility to send the amended T4s to the employees   
   affected by the changes. It appears that the company may not have done so as   
   the taxpayer stated    
   that he never received an amended T4 for 2013. In addition, the paystubs   
   issued to him “were difficult to understand, as was the record of employment   
   provided.”   
      
   The taxpayer testified that since he worked for several employers in 2013, he   
   relied on the T4s received from the company in question as well as from his   
   other employers to complete his 2013 income tax return. It was therefore   
   “difficult for him to    
   take into account that the T4 issued by (the company) did not match the amount   
   he had received from it as employment income.”   
      
   At trial, once the taxpayer understood the situation and that, indeed, $7,994   
   of employment income had mistakenly not been included on his T4, he agreed   
   that this amount had been correctly included by the CRA in calculating his   
   income for 2013.   
      
   The only issue left to be resolved, therefore, was the arrears interest   
   charged by the CRA. The judge recommended that, under the circumstances, the   
   CRA should forgive the arrears interest involved saying, “It would seem   
   unfortunate that (the taxpayer)    
   must now pay the interest due to his employer’s errors and negligence.”   
      
   Jamie.Golombek@cibc.com   
      
   Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Estate   
   Planning with CIBC Wealth Strategies Group in Toronto.   
      
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