Tax Tips:
The penalty for failing to file the T1135 Foreign Income Verification Statement on time is $25 per day for up to 100 days (minimum $100 and maximum - $2,500) in according to subsection 162(7)a of the Income Tax Act per Canada Revenue Agency (CRA).
For example, your self-employed tax return is due on June 15 and you are expecting a tax refund this year, so you decide to file your tax return a bit later until July 31 so that you don’t need to rush to pile up your tax documents.
One thing you overlooked, however, is that you also have a foreign property that is more than $100,000 (in Canadian dollar) outside Canada and required to report to CRA on the T1135 form, named Foreign Income Verification Statement.
You diligently report this asset on T1135 form and submitted the statement to CRA with your self-employed tax return on the same day through an electronic tax filing service.
Several month later, you received a Notice of Assessment from CRA and it stated that you owe $1,125.00 late penalty on filing your T1135 foreign reporting, with some additional arrears interest, that are payable to CRA immediately.
You are completely mind blocked for this unexpected owing and wondering why this happened?
To calculate the late penalty, you need to add up the number of days of late filing, which is 45 days times $25 daily penalty, which is $1,125.00 or ($25/day x 45 days = $1,125.00). OUCH! 😠
With the tax return’s deadline on June 15 for self-employed (or April 30 for anyone with specified foreign rental property, such as stockholders, rental property owners, etc., (per subsection 233.3(1) of the Income Tax Act) more than $100,000 in Canadian dollar, you will be better off to file your tax return on time, to avoid this expensive late penalty.
Email me at alice@westvancpa.com for personal and self-employed tax return support or follow me on:
Resource: Due date for Foreign Income Verification Statement