As retirement income grows more complex, high-income seniors could accidentally trigger warning signs flagged by the Canada Revenue Agency (CRA). From unreported earnings to questionable tax strategies, seniors with significant income streams may find themselves under the microscope. Here are five red flags that could put you on the CRA’s radar — and how to avoid them.
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1. Unreported income — even small omissions can cost you
The CRA is particularly watchful when seniors underreport income — intentionally or not. High-income seniors often juggle multiple income sources: pensions, dividend-paying stocks, rental income, and even part-time work or side hustles.
For July 2026 to June 2027, seniors aged 65 to 74 must keep their 2025 net world income under $151,668 to get Old Age Security (OAS) pension income – the clawback starts if your net income is over $93,454. The net income threshold rises to $157,490 for those aged 75 and older.
According to Statistics Canada, 21% of seniors aged 65 to 74 were still working in 2022 — less than half of whom were working by necessity. Whether it’s freelance consulting or investment income, every dollar counts. The CRA automatically cross-references tax slips with reported income, so omitting T-slips (like T5s or T3s) can trigger reassessments or penalties.
For instance, income stocks like Enbridge (TSX:ENB) are popular with seniors. The stock has offered yields ranging from 6% to over 9% in recent years. If held in a taxable account, these dividends must be reported — even though they benefit from a favourable tax rate. Holding such investments inside a Tax-Free Savings Account (TFSA) can help avoid these issues, but only if TFSA rules are followed properly (more on that below).
2. Pension income splitting gone wrong
Pension splitting can be a powerful tool for reducing household tax burdens, but it comes with strict rules. If the amounts split between spouses don’t match CRA records or Form T1032 is missing or incorrect, it can raise eyebrows. Mismatches in income declarations between partners are easy for CRA systems to flag, especially if one spouse has little to no income.
3. Tax shelter misuse: The CRA is watching
While TFSAs and Registered Retirement Income Funds (RRIFs) are key tools for tax planning, high-income seniors sometimes misuse them, often unintentionally.
Overcontributing to a TFSA, using the account for frequent trading (which can resemble a business activity), or holding non-qualified investments can lead to unexpected penalties and CRA audits.
Similarly, RRIF withdrawals must meet minimum thresholds. If a large, early, or misreported RRIF withdrawal isn’t handled properly, the CRA could take a closer look at your return.
4. Questionable claim for deductions and credits
Aggressive claims — especially for medical expenses, charitable donations, or other credits — can backfire. If claimed amounts are unusually high compared to reported income or past years’ patterns, expect the CRA to dig deeper.
This is especially true for seniors with high taxable incomes, where claims may appear inconsistent or strategically inflated.
5. Incorrect age amount claims
The age amount tax credit — up to $9,028 — is available to seniors 65 and older. But this credit phases out as income rises. For 2025 tax returns, the amount starts to reduce with net income over $45,522 and disappears entirely if net income exceeds $105,709.
Some high-income seniors mistakenly claim this amount, not realizing it no longer applies to them. This error is easily caught and can lead to reassessments.
The bottom line
High-income seniors face more CRA scrutiny than ever, especially when their tax filings include inconsistencies. By understanding these five red flags and staying proactive with your tax planning, perhaps by working with a qualified tax expert, you can reduce audit risk — and keep more of your retirement income working for you.
