Markham, Ontario (PRWEB) May 29, 2012
Canadian resident individuals who hold foreign property in a non registered account outside the RRSP at any time during the year which cost more than $100,000 must fill out form T1135. Foreign investments include bank accounts in foreign countries, stocks, bonds, offshore mutual funds, real estate outside Canada and income from property held outside Canada. Property that is held for personal use does not have to be reported. For example, jewellery, artwork, and a vacation property. Foreign reporting has been in effect since 1998. The foreign income verification statement must be filed on the due date of the tax return.
The penalties for failure to file the verification statement are $25 per day to a maximum of $2,500. The CRA used to be very lenient and did not usually charge the penalty if form T1135 was filed late. However, CRA’s administrative position changed several years and there are several cases now which have gone to taxpayer relief and the courts and the results have not been favorable to the taxpayer.
For example, if an individual purchased shares of Microsoft from their Canadian brokerage account in excess of $100,000 any time during the year they must fill out form T1135 by the due date of their return. Many Canadians who have brokerage accounts outside the RRSP are not aware of the penalties for not filing. Many Canadian own properties in Florida that cost in excess of $100,000 and they rent them out are also offside in respect to foreign income verification. The Florida real estate must be reported to CRA. If the form was not filed for four years the penalties and interest would be in excess of $10,000.
If an individual has not filled out the form for many years it would be advisable to contact a professional who has experience in this area by filing a voluntary disclosure with CRA. If there has not been any enforcement action by CRA a voluntary disclosure can be filed and penalties will be avoided. The disclosure must be filed first before there is any contact from CRA.
In our office we have been very successful in applying under the voluntary disclosure program in respect to the foreign income verification and our clients have had the penalties waived.