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Unfortunately, 2012 was not the first time the taxpayer forgot to include an amount in her income. In 2011, the CRA reassessed the taxpayer for unreported income totalling nearly $7,800, also from some mutual funds. Asked in cross-examination about the unreported income amount for 2011, the taxpayer testified she would not intentionally have failed to report it.
Because she failed to report an amount in income in both 2011 and 2012, the CRA assessed the repeated failure to report income penalty.
Technically, if income wasn’t reported in two years out of four, the penalty will automatically apply. But at the 2012 Ontario Tax Conference, the CRA stated that a taxpayer who has been assessed this penalty can have it cancelled “if the taxpayer can show that he or she was duly diligent in either one of the two years in which the failures occurred.”