Avoid T1135 Penalties by Filing this Form

Under the provisions from the Canadian Income Tax Act, all Canadian citizens have a general requirement to form the form T1135 in order to avoid paying T1135 penalties. Filing this form is required for those people that have a specified property in a foreign country with a value of over hundred thousand dollars at any time during the year. This form`s deadline is same as the other deadlines for filing normal income tax return.

However, the main question is what will happen if you do not file your return on time. In majority of such cases, this means that you can be subject to penalties for each day you are late. The penalty can be of $25 for each day you are late, with a maximum of hundred daily penalties, or $2,500.

Many of the people and their tax advisors falsely assume that if there are unfilled T1135 forms that go back for several years, then the CRA will impose T1135 penalties for all of those years without limitations. However, this is not the case and you will not be required to pay penalties for all of those years when you have unfiled forms. The penalty for not filing the form is levied under the subsection 162(7) of the Income Tax Act.

In general, CRA can only assess some kind of penalty for the year if the taxpayer has made a misrepresentation due to negligence or carelessness, or has committed fraud in filing this return, or has falsely included information under the Income Tax Act. In the context of filing the form T1135, if the person answers negatively in the section of T1 return related to the foreign property, then this is considered misrepresentation. But the factual question is whether that answer is attributable to neglect, carelessness or willful default. Sometimes, a taxpayer may think that they have some reason to believe that the requirement to file form T1135 does not apply to them. This can be often very confusing and complex matter, so it is advisable to get professional advice of tax consultants.

Taxpayers and tax consultants should never automatically assume that they will be penalized for not filing the form for the old years. It is always different from case to case, and the main question is always whether the person has made the misrepresentation because of neglect, carelessness or willful default.

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