As retirement earnings grows extra complicated, high-income seniors may unintentionally set off warning indicators flagged by the Canada Income Company (CRA). From unreported earnings to questionable tax methods, seniors with vital earnings streams could discover themselves below the microscope. Listed below are 5 purple flags that would put you on the CRA’s radar — and how one can keep away from them.
1. Unreported earnings — even small omissions can value you
The CRA is especially watchful when seniors underreport earnings — deliberately or not. Excessive-income seniors typically juggle a number of earnings sources: pensions, dividend-paying shares, rental earnings, and even part-time work or aspect hustles.
For July 2026 to June 2027, seniors aged 65 to 74 should hold their 2025 web world earnings below $151,668 to get Previous Age Safety (OAS) pension earnings – the clawback begins in case your web earnings is over $93,454. The online earnings threshold rises to $157,490 for these aged 75 and older.
In accordance with Statistics Canada, 21% of seniors aged 65 to 74 had been nonetheless working in 2022 — lower than half of whom had been working by necessity. Whether or not it’s freelance consulting or funding earnings, each greenback counts. The CRA routinely cross-references tax slips with reported earnings, so omitting T-slips (like T5s or T3s) can set off reassessments or penalties.
As an example, earnings shares like Enbridge (Tsx: Enb) are standard with seniors. The inventory has provided yields starting from 6% to over 9% in recent times. If held in a taxable account, these dividends should be reported — although they profit from a beneficial tax price. Holding such investments inside a Tax-Free Financial savings Account (TFSA) may help keep away from these points, however provided that TFSA guidelines are adopted correctly (extra on that under).
2. Pension earnings splitting gone unsuitable
Pension splitting could be a highly effective device for lowering family tax burdens, but it surely comes with strict guidelines. If the quantities break up between spouses don’t match CRA data or Type T1032 is lacking or incorrect, it may possibly increase eyebrows. Mismatches in earnings declarations between companions are straightforward for CRA methods to flag, particularly if one partner has little to no earnings.
3. Tax shelter misuse: The CRA is watching
Whereas TFSAs and Registered Retirement Earnings Funds (RRIFs) are key instruments for tax planning, high-income seniors generally misuse them, typically unintentionally.
Overcontributing to a TFSA, utilizing the account for frequent buying and selling (which may resemble a enterprise exercise), or holding non-qualified investments can result in surprising penalties and CRA audits.
Equally, RRIF withdrawals should meet minimal thresholds. If a big, early, or misreported RRIF withdrawal isn’t dealt with correctly, the CRA may take a more in-depth have a look at your return.
4. Questionable declare for deductions and credit
Aggressive claims — particularly for medical bills, charitable donations, or different credit — can backfire. If claimed quantities are unusually excessive in comparison with reported earnings or previous years’ patterns, anticipate the CRA to dig deeper.
That is very true for seniors with excessive taxable incomes, the place claims could seem inconsistent or strategically inflated.
5. Incorrect age quantity claims
The age quantity tax credit score — as much as $9,028 — is obtainable to seniors 65 and older. However this credit score phases out as earnings rises. For 2025 tax returns, the quantity begins to scale back with web earnings over $45,522 and disappears completely if web earnings exceeds $105,709.
Some high-income seniors mistakenly declare this quantity, not realizing it now not applies to them. This error is well caught and may result in reassessments.
The underside line
Excessive-income seniors face extra CRA scrutiny than ever, particularly when their tax filings embody inconsistencies. By understanding these 5 purple flags and staying proactive along with your tax planning, maybe by working with a certified tax skilled, you possibly can cut back audit threat — and hold extra of your retirement earnings working for you.