First, confirm it is actually an error
Before anything gets filed, have the suspected mistake confirmed and quantified by another CPA, because a surprising share of "errors" turn out to be defensible positions, timing differences, or the result of information the previous accountant was never given. An aggressive but supportable expense claim is not an error. A capital cost allowance claim that was deliberately kept low to preserve deductions for a better year is not an error either, even though it looks like one on a quick read. Neither is a difference of opinion about salary versus dividends.
Real errors fall into a few families, and the family determines the fix. Income that never made the return, such as a missed slip or an unrecorded revenue stream. Deductions or credits claimed that you were not entitled to. Carried balances that are simply wrong, such as undepreciated capital cost, loss carryforwards or shareholder loan continuity. Elections that were missed or filed late. And returns that were never filed at all, which is its own category with its own penalties.
To confirm which one you have, pull the filed returns, the notices of assessment, the year-end financial statements and whatever working papers you can get, then have the numbers rebuilt independently. That review produces the two figures every next step depends on: the additional tax at stake, and the number of years affected. Until you have both, you cannot judge whether this is a one-page adjustment or a multi-year disclosure.
You own the return, even if someone else prepared it
Canada runs on self-assessment, so the taxpayer is responsible for the return regardless of who prepared it, and CRA corrects the tax with you, not with your former accountant. That feels unfair, but it has a practical upside: you do not need the old firm's cooperation, admission or even awareness to put things right. The correction and the accountability question run on separate tracks, and the correction track should always move first, because interest accrues while you deliberate.
The accountability track still exists. CRA can levy third-party penalties against preparers for culpable conduct, though those penalties punish the preparer rather than reducing what you owe. More useful to you: CPA firms in Ontario carry mandatory professional liability insurance, and a documented claim for penalties and interest caused by a genuine preparer error is often resolved through that coverage or negotiated directly. Keep the paper trail: the engagement letter, what you provided and when, and the firm's own working product.
One caution before you escalate. If the accountant filed from the information you supplied and the information was wrong or incomplete, the error is yours, and pursuing the firm will go nowhere while souring the records handover you still need.
How the correction gets filed
The filing route depends on which return is wrong, how many years are affected, and whether the omission could look deliberate to a CRA reader who assumes nothing in your favour. For a single recent year with an innocent explanation, a straightforward adjustment is normally the whole answer.
| Where the error lives | How it gets corrected |
|---|---|
| Personal T1 return | An adjustment through CRA My Account, ReFILE or a T1-ADJ. Most items can be adjusted for roughly the ten prior calendar years. |
| Corporate T2 return | An amended return or a written reassessment request. Continuity balances such as UCC, losses and shareholder loans must be repaired forward, not just in the error year. |
| GST/HST returns | Some amounts can be picked up on a later return; others need a written request to reassess the original period. |
| Payroll and T4s | Amended slips and summaries, with source-deduction shortfalls remitted promptly because payroll penalties escalate quickly. |
| Several years, unfiled returns or penalty exposure | A voluntary disclosure rather than a stack of adjustments, so relief attaches to the whole correction. |
The dividing line that matters most is penalties. If the correction is small, recent and innocent, adjust it and pay the tax with interest. If it spans years, involves conduct that could attract penalties, or includes returns that were never filed, read our page on when the Voluntary Disclosures Program is the right tool before filing anything, because a plain adjustment gives up relief a disclosure would have secured. Missed slip income from investment accounts is the most common single case, and it has its own playbook: how to correct unreported investment income.
Penalties, interest and who ends up paying
Interest is the one cost that always shows up. CRA charges arrears interest from the original balance-due date until payment, compounded daily at a prescribed rate that resets quarterly, and it runs whether the mistake was yours, your accountant's or nobody's in particular. This is why quantifying fast and paying the estimated tax early, even before the reassessment lands, is usually the cheapest move available.
Penalties are more situational. Late-filing penalties apply where a return went in late or not at all. A repeated failure to report income can trigger its own penalty when it happens more than once within a few years. Gross-negligence penalties, the serious ones, require CRA to show the misstatement was made knowingly or with real carelessness, and an honest error by a professional you reasonably relied on is a strong answer to that, provided you can document the reliance.
Where penalties or interest do get assessed, the taxpayer relief provisions let CRA cancel or waive them within ten years for CRA delay, circumstances beyond your control or financial hardship. A preparer's mistake, on its own, is a hard relief argument, because CRA's position is that choosing the preparer was your decision. That is exactly where the professional liability route earns its keep: relief handles what CRA caused, and the firm's insurance handles what the firm caused.
The facts that change the answer
Five pages of tax rules reduce to a handful of facts. When we assess one of these files, this is what actually swings the plan:
- Which return, and how many years. One T1 year is an afternoon; five corporate years is a project with a disclosure decision attached.
- Direction of the error. Mistakes in CRA's favour mean you overpaid, and refunds are recoverable within the adjustment window. Not every discovered error is bad news.
- Whether CRA has made contact. Silence means options; a letter means deadlines and fewer relief routes.
- How the conduct reads. A missed slip reads as innocent. A pattern of unreported revenue reads differently, and the correction route must respect that.
- Access to records. A cooperative former firm shortens everything. If the relationship has gone cold, the records request needs to be formal and early.
- Deadlines already running. The ten-year adjustment limit, objection deadlines on any assessment, and reassessment windows all cap how long you can think about it.
How a new CPA takes it over
The cleanest path is one firm quantifying the damage, filing the correction, dealing with CRA and then keeping you compliant, so the same failure cannot repeat. When we onboard an owner in this position, the first deliverable is a file review: prior returns re-performed, continuity balances checked, elections and carryforwards verified, and a written list of what needs fixing ranked by dollars and deadline. The second is a compliance calendar covering every filing, instalment and remittance across your entities, because most inherited errors trace back to nobody owning the calendar.
Document retention matters here too. Keep six years of records as a floor, and keep the correction file itself, the working papers, correspondence and proof of what the previous accountant had, permanently. This is the core of our CRA support and corporate compliance work for Ontario owner-managers, handled under CRA Audit & Review Support, with scope and fee set out in writing after a free 15-minute discovery call. You will know what the fix costs before you commit to it, which is more than the error ever offered.
