Unreported income is income a taxpayer earned but did not include on a filed return — cash sales, side-business revenue, rental or investment income, foreign income, or capital gains. Because Canada taxes residents on worldwide income from all sources, the obligation to report does not depend on whether a slip was issued or whether the payer was Canadian.
The Canada Revenue Agency identifies unreported income through slip matching, audits, indirect verification methods such as net worth assessments, third-party and bank records, and international information exchange. Consequences scale with the conduct: arrears interest, repeated-failure-to-report penalties, gross-negligence penalties of 50% of the understated tax, an extended reassessment period where there has been a misrepresentation, and, in serious cases, criminal investigation. A taxpayer who comes forward before the CRA makes contact may qualify for penalty relief under the Voluntary Disclosures Program.