A recent tax court decision has put a spotlight on how small filing mistakes can snowball into large penalties over time. Financial expert Jamie Golombek said the case shows how a simple error, repeated across years, can lead to steep costs for taxpayers. The ruling, handed down in Canada, raises fresh questions about how revenue agencies apply penalties and what taxpayers can do to avoid them.
The central issue is not a one-off slip. It is a recurring mistake that gets repeated on annual returns or forms. When that happens, laws that assign penalties per year can multiply the bill. That can create a large liability even when no tax was intentionally avoided.
“Recent court case illustrates how taxpayers can be hit with penalties if a mistake is multiplied over years.” — Jamie Golombek
How Repeated Errors Trigger Bigger Penalties
Tax rules in Canada include a range of per-year penalties. Some apply when a return is late. Others apply when required information slips are missing. The total cost can grow quickly when the same item is missed year after year.
Common examples include late filing penalties, repeated failure-to-report income penalties, and information return penalties for foreign assets or corporate interests. Each has its own formula, but most are assessed for each tax year.
- Late filing can trigger a base penalty and extra monthly amounts.
- Repeat late filers can face higher rates if they were penalized before.
- Missing information forms can lead to daily penalties up to a set cap, per year.
Courts have often found that the law leaves little room to waive these charges when the rules are clear. Even honest mistakes may not shield a taxpayer from repeated-year penalties.
Background: The Rules Behind the Rulings
Under Canadian law, a first late filing penalty can be 5% of the balance owing plus 1% per month, up to 12 months. If a taxpayer was also late in any of the previous three years and had been charged a penalty, that rises to 10% plus 2% per month, up to 20 months.
For information returns, the law can set daily penalties. One common form for reporting specified foreign assets carries a penalty of $25 per day, up to $2,500 per year. Other forms have similar structures. If the same form is missed for several years, the totals add up fast.
There is also a repeated failure-to-report income penalty. If a taxpayer misses reporting a small amount of income in one year and again in any of the next three years, the penalty can apply, even if the amounts are modest. The idea is to encourage accurate, complete reporting every year.
Expert Views and Public Response
Golombek’s warning reflects a common theme among tax professionals. Many clients assume that a small oversight will be treated as minor. But the law can treat recurring problems as serious because they happen over multiple filings.
Some advisers argue that clearer guidance and early notices could prevent repeat mistakes. They say technology and plain-language alerts could help taxpayers fix errors before they recur. Others say the current system already offers relief through voluntary disclosures and fairness requests, and that penalties play a role in compliance.
Courts often look for evidence of reasonable care, prompt correction, and cooperation. But when the statute prescribes fixed amounts, judges may have limited room to reduce them.
What Taxpayers Can Do Now
Experts recommend a few steps to avoid repeated penalties. The goal is to spot and fix problems early, before another year passes.
- Review last year’s return and forms to keep consistency.
- Track deadlines and set reminders for each required filing.
- Confirm whether any foreign asset or corporate information forms are required.
- Use a checklist and retain proof of submissions.
- If an error is found, consider the voluntary disclosures program before the next filing season.
Businesses should also audit their information returns. Missing slips for contractors, cross-border payments, or foreign affiliates can lead to per-year penalties that are easy to miss until a review.
What This Means Going Forward
The decision highlights a key risk: the compounding effect of small but repeated errors. It also shows that taxpayers should not wait for an audit to fix a pattern. The cost of inaction grows with each year.
For policymakers, the case could renew discussion about proportional penalties and whether repeat charges fit the conduct in question. For taxpayers, the message is clear. Build better controls now, document your process, and correct errors as soon as they are found.
As Golombek noted, a single mistake can become a long, expensive problem when it repeats. The next filing season will test whether Canadians take that warning to heart.
