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We have done lot of internal money transfers between my Single savings account, my parents Single savings account and our Joint Bank savings accounts.
We have lost track of who the original money belongs to. As this has been going on for 10-15 years. We have combined finances.
At the end of the year when we get a T5 slip, we report the interest on whoever's SIN is on the T5 slip. Even for Joint account, the person whose SIN was on the T5 slip, the primary account we have reported the T5 interest income in his name only.
We have not followed the attribution rules or who contributed the money rules. We haven't shown the interest income as 50:50 or 80:20 or whatever the case maybe. We have only shown the income as 100& based on the SIN on the T5 slip.
How do we rectify this now? Do we have to go line by line for the last 10-15 years and see who that money belongs to in each account. Even we don't know or can't remember!
What will CRA do, if they decide to audit us? If we can't explain who the money belongs to amongst us? Because all the finances are combined.
Will the CRA reassess all our past 10-15 years of returns for all 3 of us and allocate the interest to the highest income earner or something? Or do a 50:50 split between us. Or 80:20 split or 70:30 split or something. What does CRA normally do in such cases?
Any fines, interest & penalties we are looking at?
Dear Caroline,
Thank you for your detailed message.
You're not alone—many families with joint and interlinked finances face this kind of complexity over time. The CRA’s main concern in these situations is that interest income is reported accurately based on actual ownership or contribution to the funds, in line with attribution rules.
If interest from joint accounts has consistently been reported under one person's SIN (as shown on the T5 slip), and the reporting does not reflect the actual contributions, then technically this may not align with CRA guidelines. However, given the long history and difficulty in tracing exact sources of funds, CRA will typically consider a reasonable approach if there's evidence of good faith and consistent reporting.
To address the situation:
1.You are not expected to trace every transaction over 10–15 years if it's no longer feasible. CRA understands that perfect records aren’t always possible over that span.
2.Going forward, consider reporting interest income based on the actual ownership or contribution to the account. If it's unclear, a reasonable estimated allocation (like 50:50 or based on income/spending ratios) may be used—as long as it's applied consistently and can be supported.
3.If CRA audits, they may ask for:
- An explanation of how the income was reported.
- Some rationale for the allocation used (even if approximate).
- Evidence of consistency over time.
In the absence of clear ownership records, CRA may default to a 50:50 split for joint accounts, unless there's a justifiable alternative. They typically don't reallocate automatically to the highest income earner unless there's a sign of income splitting solely to reduce taxes.
4.Regarding penalties: if there's no intentional misreporting or deception, and you’ve consistently reported based on the T5 slips, CRA is unlikely to impose severe penalties. However, if they do reassess, there could be interest on unpaid amounts, but penalties can sometimes be waived if a voluntary disclosure is made or if the error is unintentional.