A January 6, 2026 Tax Court of Canada case reviewed assessments of unreported revenues of over $6.4 million over two taxation years, 2013 and 2014. These amounts were determined through bank deposit analysis by CRA. Over $1.7 million of the amount resulted from failure to translate revenues denominated in foreign currency to Canadian dollars. The court noted that CRA’s use of average foreign exchange rates to calculate the difference was reasonable. CRA reassessed outside the ordinary reassessment period and imposed gross negligence penalties.

Taxpayer loses. The court noted that the under-reported revenue was a misrepresentation. The taxpayer’s owner and manager, B, was well-educated, having obtained both a commerce degree and designation as a chartered accountant. B’s assumption that his software converted foreign currency was not sufficient – the implications of the weakening Canadian dollar in the years in question should have been apparent to him.

The choice not to engage additional accounting resources despite knowing that both he and the one employee engaged in the taxpayer’s accounting were overwhelmed with work indicated an indifference to tax compliance. This justified reassessment past the normal reassessment period. The indifference also led to the court’s conclusion that B, and through him the taxpayer, was grossly negligent in the tax filings and the penalty was upheld.

Recommendation for Canadian therapists: ensure sufficient internal accounting and bookkeeping processes are in place. Inadequate accounting support can lead to errors, reassessments beyond the normal limitation period and gross negligence penalties.