The CRA sent me a letter saying I didn’t report my tips. What do I do?

What to do this week

1. 1Read the letter for three things: the tax year, the reference number in the upper right corner, and the reply date.
2. 2Pull your records for that year: your T4 slips, pay stubs, and whatever you kept of your tips (a notebook, calendar, app log or bank deposits).
3. 3Split your tips the CRA’s way. Controlled tips, the ones your employer handled, are already in box 14 of your T4. Direct tips, the ones customers gave you, are the part you had to report yourself.
4. 4Reply by the due date, through My Account or by mail to the address in the letter, with the reference number. If a document doesn’t exist, send a written explanation instead.
5. 5Running late? Call the number at the bottom of the letter before the due date and say you need more time.

Not tax or legal advice. If the amount is large or the letter mentions penalties, a tax professional can review it with you.

Plain English

What the letter usually is

The CRA runs several kinds of reviews. In its Matching Program, “information on your return is compared to information provided by third-party sources, such as employers or financial institutions.” Its Processing Review Program looks at returns after the notice of assessment has gone out. The CRA’s own review page says a review “is not a tax audit” and is usually a routine check that what you reported is correct.

What the CRA says about tips

Its rule is short: “all tips and gratuities you receive are considered taxable income and must be reported on your income tax and benefit return.” Tips your employer controls, such as an employer-run pool or a service charge, are reported by your employer in box 14 of your T4 with tax, CPP and EI taken off. Direct tips, paid to you by customers, aren’t on any slip. You report those yourself as other employment income. See Do servers pay tax on tips in Canada? for the full split.

If the CRA reassesses you

The CRA’s tips page says that if it reassesses your return and you haven’t declared all your tips, “you will have to pay what you owe, plus interest and possibly penalties.” The reassessment comes as a new notice of assessment.

Disagreeing: the Notice of Objection

• Call first. The CRA says to call the number on your notice before objecting, and that many disputes are resolved that way.
• Deadline: for most individuals, the later of one year after the filing deadline for that return, or 90 days after the date on the notice of assessment or reassessment.
• How: in My Account (“Register my formal dispute”), on Form T400A mailed or faxed to the Chief of Appeals, or in a signed letter setting out the facts and your reasons.
• Collection: the CRA normally holds off collecting the disputed amount until 90 days after it sends its decision on your objection.
• Already asked for an adjustment? The CRA notes it may be faster to wait for that than to file an objection.

Fixing past years on your own

The CRA’s Voluntary Disclosures Program “grants relief on a case-by-case basis” to people who come forward to fix errors or omissions in their tax filings. The program changed on October 1, 2025. If other years have the same gap, ask the CRA whether it applies to you.