Snowbirds with more than $100,000 in assets outside Canada must be aware of the risks of failing to report this to the Canada Revenue Agency.
In the second part of an interview on Canadian residents who flee south to the US to avoid our brutal winters, Lisa Gittens, a tax professional with H&R Block, says filing your tax return is not complicated, but not reporting everything can make it complicated. Not to mention expensive.
The $100,000 is an aggregate benchmark that can include stocks, bonds and real estate, and she urged advisors to make clients aware of the incremental penalties the failure to file, or correctly complete, the T1135 Foreign Income Verification Statement will incur.
The T1135 is a report of any foreign property held by a Canadian in a non-registered account. Anything sitting in your RSP or your TSFA is exempt.
Gittens explains: “If you do not tell the Canadian government about the foreign income, what happens to you is you are now non-compliant for reporting, so you face a penalty of $25 a day up to a maximum of $2,500 because you failed to register the T1135. That’s for failing to file the form.
“If you continue or fail to report something on the form, there is a penalty of $500 per month applied up to 24 months, up to a maximum of $12,000. If you fail to report any item and revenue Canada finds out and sends you a demand letter, you’re now facing a penalty of $1,000 for every month you fail to report, up to a maximum of 24 months, a dollar value of $24,000 in penalties.
“And if after 24 months you still fail to file or supply the information to Revenue Canada, they assess another 5% penalty based on their estimated cost of the property for fair market value.”
Gittens says advisors must stress the accuracy of snowbirds reporting their assets accurately to their clients to avoid complications down the road.
She said: “In a nutshell what I’m trying to say is, filing your tax return is not complicated. But not reporting everything on the tax return can make it complicated. So you want to file an accurate tax return.
“It doesn’t hurt to ask a question. Any Canadian tax expert, and especially us at H&R Block, it’s a service we provide free of cost. Not asking the question could potentially cost you thousands.”
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