T1135 Foreign Income Verification Statement Form

Completing the voluntary disclosure T1135 is a necessary step for disclosing foreign income. Failing to disclose may result in being charged with tax evasion and facing penalties, interest and possibly jail time.

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What is the T1135 Foreign Income Verification Statement & Why Is It Important?

 

In recent years, the Canada Revenue Agency (CRA) has significantly cracked down on cases of foreign income and foreign property in an attempt to catch those who did not properly declare these assets and income. Form T1135 Foreign Income Verification Statement must be filed by anyone who owns specified foreign property costing more than $100,000. At first glance, you may assume that this only applies to real estate properties, but that is not true. “Property” includes various assets such as bank accounts and stocks or bonds, as well as real estate.

When you complete the T1135 Foreign Income Verification Statement, you are required to list important details about your property, such as the location, its maximum cost, and any income generated by this property. It’s important to remember that the $100,000 valuation is regarding the property’s value in Canadian dollars. This value is based on the adjusted cost base of the property. However, in the case of a gift or an inheritance, the cost is based on the fair market value for the asset at the time it was received by the taxpayer.

However, the specified foreign property does not include property used or held exclusively for carrying on an active business, investments you hold inside your Registered Retirement Savings Plan and Tax-Free Savings Account, or personal use property.

For individuals, corporations, and trusts, the T1135 Foreign Income Verification Statement is due on the same date as your income tax return. For partnerships, this form is due on the same date as your partnership information return.

There are significant penalties for failing to disclose foreign assets and income to the CRA.

 

Failing to Disclose Foreign Assets and Voluntary Disclosure T1135

 

If you did not disclose your foreign assets to the CRA in previous years, there is an option available known as Voluntary Disclosure. This is a program designed to give people a “second chance” to properly complete tax documents. When it comes to voluntary disclosure and form T1135, you are able to complete the required form for previous tax years, potentially giving you relief from prosecution and, in some cases, from penalties and interest that you would otherwise be required to pay.

However, a key aspect of the Voluntary Disclosure Program is that your disclosure must be voluntary. This means you will need to provide the CRA with the required information before they come asking for it. You are also required to disclose all missing information. For instance, if you did not disclose foreign assets between 2011 and 2016, your voluntary disclosure and T1135 form must include all foreign assets owned in all of these years. You can’t leave anything out and you must provide these details before the CRA comes calling.

Since you are providing the CRA with information that it does not already know, this process can potentially be risky. You could open yourself up to additional investigation and potentially an audit if you do not complete the voluntary disclosure and form T1135 correctly. That’s why it is important to work with an experienced professional whenever you are dealing with the CRA.

Farber Tax Solutions is a tax dispute resolution firm serving clients across Canada. Our team of ex-CRA professionals, working in affiliation with tax lawyers from Farber Tax Law, provide holistic and high-quality tax advice. We have built our reputation on outstanding client service and are committed to helping you succeed in your tax matter. Whether you are dealing with a situation related to the T1135 Foreign Income Verification Statement or any other issue, we can help. Contact us today for more information.

Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:

  • 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
  • 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
  • 3| Offer a complete solution to your tax problems, including ex-CRA professionals and tax lawyers from Farber Tax Law.