CRA decision to deny taxpayer late-filing relief sent back for review by judge
If you own foreign investments whose total cost exceeds $100,000 at any point in a tax year, you’re required to file a Form T1135, Foreign Income Verification Statement, which covers obvious foreign assets, such as funds in a Cayman bank account, but also foreign stocks held in a Canadian, non-registered brokerage account.
Foreign securities held inside pooled products, like Canadian mutual funds, or inside a registered account, such as a registered retirement savings plan (RRSP), registered retirement income fund (RRIF), tax-free savings account (TFSA), registered education savings plan (RESP), registered disability savings plan (RDSP) or first home savings account (FHSA), are excluded. A foreign vacation home, like a Florida condo, is also excluded provided it’s primarily for personal use.
The penalty for failing to file a T1135 on time is $25 per day to a maximum of $2,500, plus non-deductible arrears interest, compounded daily, charged at the prescribed rate for overdue taxes, which is currently sitting at nine per cent. If you are more than 100 days late in filing the form for a particular tax year, you’re hit with an automatic late-filing penalty of the $2,500 maximum, plus interest.
That’s what happened to an Alberta taxpayer who filed her T1135s for the 2015 and 2016 tax years in 2020. The Canada Revenue Agency assessed the taxpayer penalties and interest totalling about $6,000 for not filing the two T1135s on time.
After being assessed, the taxpayer wrote to the CRA requesting relief from the penalties and interest. She provided medical information to the CRA about her and her husband’s health situations and described the long-standing challenges she was experiencing in areas such as decision-making, time
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