CRA Penalties for Failing to Report U.S. Investments
A recent Tax Court of Canada decision serves as a reminder of how costly foreign reporting errors can be. An Ontario taxpayer was assessed $5,000 in penalties for failing to file Form T1135 (Foreign Income Verification Statement) in 2019 and 2020, after her U.S. investments exceeded the $100,000 reporting threshold.
The taxpayer argued she was duly diligent and noted the confusing nature of the rules: since U.S. securities in Canadian brokerage accounts do count as foreign property, while the same holdings in RRSPs or RRIFs do not. The Court was sympathetic but emphasized that this was not her first error: she had previously made a voluntary disclosure for the same issue. Having once been warned, the Court found a reasonable person would have been on “high alert” to avoid repeating the mistake, and the penalties were upheld.
Takeaway: Form T1135 is required whenever specified foreign property (such as U.S. stocks like Apple or Nvidia, even if held in a Canadian brokerage account) exceeds $100,000 in cost during the year. The penalties for failing to file are $25 per day, up to $2,500 per year, plus arrears interest, which can add up quickly.
If you have foreign assets or investments, it is critical to ensure compliance with Canada’s reporting requirements. Our firm regularly assists taxpayers with foreign reporting, voluntary disclosures, and CRA disputes to help avoid or mitigate penalties.
If you have received Notice of Reassessment from CRA, Call us for a FREE initial consultation. 416-601-1002
