As many of you may be aware, the reporting information related to preparing your tax returns has become more erroneous over the last couple of years. This is largely as a result of having to now report information that is not related to income and expenses, which historically is what CRA was concerned about.
Starting in 1997 individuals who have non-Canadian investments, whose cost (ACB) is in excess of $100,000 Cdn are required to file form T1135. Exclusions for foreign property used for personal use are excluded, but foreign investments held at a Canadian brokerage firm are not.
Unfortunately, this is just not just a meaningless exercise, as failure to file this form can cost a taxpayer a daily fine of $25 per day, up to a maximum of $2,500 per year. Obviously if someone is unaware of this requirement the penalties can be extremely prohibitive, this is especially the case if this has been omitted over several years.
Thankfully many of the brokerage firms have been providing reports to assist us in facilitating this process, but in some cases it can be a cumbersome process.
BUT FAILURE TO FILE THE DISPOSTION OF YOUR PRINCIPAL RESIDENCE CAN BE FAR WORSE
For the sale of a principal residence in 2016 or later tax years, CRA will only allow the principal residence exemption if you report the sale and designation of principal residence in your income tax return.
If you forget to make a designation of principal residence in the year of the sale, it is very important to ask the CRA to amend your income tax and benefit return for that year. Under proposed changes, the CRA will be able to accept a late designation in certain circumstances, but a penalty may apply.
The penalty is the lesser of the following amounts: $8,000; or
$100 for each complete month from the original due date to the date your request was made in a form satisfactory to the CRA.
So as one can see, CRA is not playing games with this requirement, which is why we are striving to inform all our clients about this requirement.
If any of our clients have any questions, or concerns, we certainly invite you to contact us at 988-9876, and we would like to take this opportunity to sincerely thank you for allowing us to provide you with our services.