Personal Finance

There is a penalty if you file tax late and has T1135?

  • Last Updated:
  • Feb 18th, 2019 3:28 am
[OP]
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Jan 21, 2014
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There is a penalty if you file tax late and has T1135?

I just got a letter from CRA saying that because I filed income tax late (with T1135), they penalized me with $2500 + $68.30 interest despite I got a refund with my tax :(. has anyone gotten hit with similar penalty before and if there is anyway to appeal or reduce the penalty? I hold some U.S. stocks in non-registered account and they just went over $100K the end of last year. I knew I would get a refund with my tax so I was late on filing my tax and didn't realize there is a penalty with T1135 when you file after April 30. The sad part is the portfolio drops quite a bit the last 2 weeks so this year, I don't have to worry about that anymore. It's just a tough pill to swallow.

Update: subsection 162(7)a of the Income tax Act mentioned penalty on unpaid tax (which I didn't have). But under T1135 also mentioned individual will have to report this by April 30. else it will be subjected to penalty $25/day for up to maximum of 100 days ($2500). On the other hand, if I didn't report and if they happened to find out, I will be penalized $500/month which would be $2000 only :(
17 replies
Deal Addict
Feb 4, 2015
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Canada, Eh!!
The 100k is based on cost... so when you say "they just went over $100K the end of last year" was that market value or cost value.

Also, this is entirely yours or joint acct?
[OP]
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Jan 21, 2014
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georvu wrote:
Oct 19th, 2018 9:02 pm
The 100k is based on cost... so when you say "they just went over $100K the end of last year" was that market value or cost value.

Also, this is entirely yours or joint acct?
Market value. It’s joint account but unfortunately I always reported on me only for the last 10 years so I don’t want to complicate things and split the account which of course would be below $100K for each.
Jr. Member
Jul 29, 2007
179 posts
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Toronto
If the COST of your specified foreign property never went over $100k at anytime during the year, then you don't need to file the T1135. You could probably appeal if you can prove that. Otherwise, the penalty is $25/day, minimum $100 and maximum $2500.
[OP]
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Jan 21, 2014
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goo421 wrote:
Oct 19th, 2018 10:35 pm
If the COST of your specified foreign property never went over $100k at anytime during the year, then you don't need to file the T1135. You could probably appeal if you can prove that. Otherwise, the penalty is $25/day, minimum $100 and maximum $2500.
Thanks. If that’s the cost then I don’t think it went over. I will double check that and file an appeal or tax adjustment.
[OP]
Deal Addict
Jan 21, 2014
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yeah. I checked cost base for those stocks and they are definitely less than $100K (with a big margin even). So thank you @goo421, It was all TDDI fault. They sent me a summary of my portfolio (for foreign investment) with market value for each of the month in 2017 (first time I saw that info) and some of the months were over $100K CAD, so I thought I needed to file T1135 this year (never had to before).

Update: I did a detail review of both RBCDI & TDDI and the highest book values of combined holdings of US stocks in 2017 was < $50K. Now I have to call CRA Monday and do a refile. Hopefully they can reverse the penalty and interest. Thanks again @goo421 for pointing out the mistake
Last edited by mkl38s on Oct 20th, 2018 8:23 am, edited 1 time in total.
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Feb 19, 2010
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OP, sounds like it would be cheaper for you to hire an accountant to do your taxes.

Not only did you not know about the late filing of the T1135 and the resulting penalties, it seems you're not aware of the criteria for filing it in the first place. And to add to that, it sounds like you're incorrectly reporting joint income/gains as your own which is another no-no that will potentially cost you some more tax and penalties along with the joint owner.

Twenty-five hundred bucks buys a lot of tax prep.
[OP]
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Jan 21, 2014
4145 posts
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Conquistador wrote:
Oct 19th, 2018 11:11 pm
OP, sounds like it would be cheaper for you to hire an accountant to do your taxes.

Not only did you not know about the late filing of the T1135 and the resulting penalties, it seems you're not aware of the criteria for filing it in the first place. And to add to that, it sounds like you're incorrectly reporting joint income/gains as your own which is another no-no that will potentially cost you some more tax and penalties along with the joint owner.

Twenty-five hundred bucks buys a lot of tax prep.
I actually have a good reason reporting joint income/gains on myself only. It's because my wife doesn't work. If I split the money, that would probably give CRA more reason to look into it. I have been doing it this way forever and they never questioned me once. I pay more tax so why would CRA want me to split it right?
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Mar 3, 2018
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mkl38s wrote:
Oct 20th, 2018 12:24 am
I actually have a good reason reporting joint income/gains on myself only. It's because my wife doesn't work. If I split the money, that would probably give CRA more reason to look into it. I have been doing it this way forever and they never questioned me once. I pay more tax so why would CRA want me to split it right?
If your wife doesn't work I assume she never contributed funds to the foreign investment. Meaning you were the source of funds. If that is the case then you are correct in that you solely should be reporting it.
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Feb 19, 2010
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mkl38s wrote:
Oct 20th, 2018 12:24 am
I actually have a good reason reporting joint income/gains on myself only. It's because my wife doesn't work. If I split the money, that would probably give CRA more reason to look into it. I have been doing it this way forever and they never questioned me once. I pay more tax so why would CRA want me to split it right?
Source of funds for the investments would be one of the questions. Given your apparent stampeding through the CRA minefield blissfully unaware, it's a fair point to have raised and for you to consider.

Your tax situation is your own but you may be raising red flags with CRA because of these T1135 issues.
[OP]
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Jan 21, 2014
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No argument there as this is my own mistake. First time doing T1135 and didn't do much reading into it. Now I just hope that I can sort this out without much harm done. Also I could partially blame TDDI for sending me summary of highest market values of my foreign securities ownerships for every month in 2017 so I can prep for my T1135. Couldn't they just have sent the book values instead?
Jr. Member
Mar 6, 2015
148 posts
188 upvotes
This happens to taxpayers more than you think.

Best course of action would be to file form RC4288 as well as write a letter to the chief of collections at CRA and ask for a waiver of interest and/or penalties based on the income tax act section 220 (3.1). Read this section of the tax act, it will provide you with valid reasons why CRA would be able to remove the interest and penalties.

(3.1) The Minister may, on or before the day that is ten calendar years after the end of a taxation year of a taxpayer (or in the case of a partnership, a fiscal period of the partnership) or on application by the taxpayer or partnership on or before that day, waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by the taxpayer or partnership in respect of that taxation year or fiscal period, and notwithstanding subsections 152(4) to (5), any assessment of the interest and penalties payable by the taxpayer or partnership shall be made that is necessary to take into account the cancellation of the penalty or interest.

In addition, you can make reference to the information circular IC07-1 dated May 31, 2007, paragraph 23 and 24. Looking it up on Google will take you directly to it.

Hope this helps
[OP]
Deal Addict
Jan 21, 2014
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this is what TD DI did and tripped me up

Image

But, it was mostly my fault that I also should have known about the penalty for filing late, plus cost of foreign property should be used, instead of market value TD provided me

From CRA website:

Cost amount and the $100,000 reporting threshold
9. Is the $100,000 threshold based on the fair market value of the property?
No, it is based on the cost amount. The cost amount is defined in subsection 248(1) of the Income Tax Act and generally is the adjusted cost base and not the fair market value.

I will refile my tax tomorrow and try to remove the t1135 declaration. But I probably will call them first about the letter I received and my intention of refiling. I am not sure what documents they will need me to submit. would monthly statements from TDDI & RBC DI which outlining the 'book values' of all my foreign investments be sufficient?
Jr. Member
Jul 29, 2007
179 posts
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Toronto
The banks provide a variety of reports, depending on which bank and what level of service you're paying for. I know I've seen reports that show both cost and market value, and I know I've seen reports that are not necessarily correct. Hence they all come with big disclaimers. The reason they sometimes show market value is because if you meet certain requirements, you can report under Category 7, which asks for market values. But even if you use that, your obligation to file the T1135 is still based on cost.
[OP]
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Jan 21, 2014
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I just wanted to update that it took almost 3 months but CRA finally accepted my refile and notified me about the cancellation of penalty + interest. Thanks again @georvu and @goo421 for pointing out the mistake I made

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