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T1135 Late Filing Penalty

T1135 Late Filing Penalty

Old Apr 24th 2013, 8:46 pm
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Default T1135 Late Filing Penalty

Just received a double late filing penalty from CRA relating to the 2011 T1135.

I filed the 2011 tax returns using Turbotax in time last April and paid the tax due. Shortly afterwards I received the notice of assessment from CRA which was all ok.

Some time afterwards I realised that the T1135 forms included in the online submission hadn't been signed. I corrected this by mailing the signed forms to CRA. No news from CRA for months until a $2.5k penalty notice received for each of us.

Anyone got any experience on the best approach to dispute the penalty?
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Old Apr 24th 2013, 9:26 pm
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Default Re: T1135 Late Filing Penalty

You could appeal via the Tax Court of Canada. www.tcc.cci.gc.ca

Revenue Canada didn't used to assess penalties until fairly recently. The penalty is a minimum of $100 or $25 per day for a max of 100 days. They can seemingly assess fines even if there is no tax to pay. Check out the web site. It might give you an avenue to pursue this.
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Old Apr 24th 2013, 9:35 pm
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Default Re: T1135 Late Filing Penalty

They're really tough on the T1135, I had something similar happen awhile back, filed it, they lost it in internal mail, they only realized this because I mentioned it during a conversation over my T4 and so I sent them a copy. So they sent me a late filing penalty notice, eventually I convinced them the original had been lost. They have some sort of log where they log everything but apparently this log is kept by someone in Winnipeg and the office that deals with the T1135 is in Ottawa, blah, blah.

I still say filing on paper is better, because you can always blame something going wrong on the idiot in the mail room or whoever transcribed it. Problem is that sometimes there is an idiot in the mail room or whoever transcribed it...

Always send everything by registered mail now.
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Old Apr 24th 2013, 10:46 pm
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Default Re: T1135 Late Filing Penalty

I agree it is a tough one to dispute. I assume 2011 was not the year you moved to Canada?

The instructions state if you file electronically you must send a hard copy of the T1135 by the due date. The penalties are automatic, there is no discretion allowed by the Act. You can appeal to the fairness commission if there are circumstances beyond your control that prevented you filing on time. It doesn't sound as if there is.

It is not much help now, but if anyone finds themselves in a similar position in the future it is best to do this under the voluntary disclosure program.

Last edited by JonboyE; Apr 24th 2013 at 11:30 pm.
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Old Apr 24th 2013, 11:02 pm
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Default Re: T1135 Late Filing Penalty

Originally Posted by jimf View Post
Anyone got any experience on the best approach to dispute the penalty?
But you did submit the T1135 with your tax return, you just didn't sign that specific form?

I would appeal and argue that not signing the T1135 you did submit is de minimus because you submitted it with a properly completed tax return. You disclosed the relevant information.
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Old Apr 24th 2013, 11:14 pm
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Default Re: T1135 Late Filing Penalty

Originally Posted by JonboyE View Post
I agree it is a tough one to dispute. I assume 2011 was not the year you moved to Canada?

The instructions state if you file electronically you must send a hard copy of the T1135 by the due date. The penalties are automatic, there is do discretion allowed by the Act. You can appeal to the fairness commission if there are circumstances beyond your control that prevented you filing on time. It doesn't sound as if there is.

It is not much help now, but if anyone finds themselves in a similar position in the future it is best to do this under the voluntary disclosure program.
2011 is the 3rd Canadian tax return so T1135 is required.

CRA didn't notice any omission when I filed the return. I took the initiative to correct the situation when I noticed the omission myself.
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Old Apr 24th 2013, 11:19 pm
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Default Re: T1135 Late Filing Penalty

Originally Posted by Steve_ View Post
But you did submit the T1135 with your tax return, you just didn't sign that specific form?

I would appeal and argue that not signing the T1135 you did submit is de minimus because you submitted it with a properly completed tax return. You disclosed the relevant information.
TurboTax generates the T1135 form in the set. The name/SIN etc are entered on the T1135 form automatically but none of the boxes are ticked and the form wasn't signed. The electronic version of this form was included in the tax return by electronic submission on 30 April 2012.

All the income relating to the property was declared and tax paid on 30 April 2012.
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Old Apr 24th 2013, 11:36 pm
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Default Re: T1135 Late Filing Penalty

The wording in the act is:

162(7) Failure to comply -- Every person ... who fails

(a) to file an information return as and when required by this Act or the regulations, or

(b) to comply with a duty or obligation imposed by this Act or the regulations

is liable in respect of each such failure ... to a penalty equal to the greater of $100 and the product obtained when $25 is multiplied by the number of days, not exceeding 100, during which the failure continues.


They will argue that if a T1135 is not completed or executed then it is not filed as required by the act.
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Old Apr 24th 2013, 11:54 pm
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Default Re: T1135 Late Filing Penalty

If you filed electronically then Turbo Tax would have filled in the form as per your direction. Being electronic, no signature would be required. Either call the CRA or Turbo Tax, or both. It seems someone in thew CRA is not paying attention to the fact you did file on time. The problem is compounded by sending a hard copy as well.
1-855-284-5942 will get you the people who deal with foriegn income.
1-800-959-8281 will get you the tax office. Have all your information handy including your client number.
Turbo tax can be contacted via the net www.intuit.ca/turbotax. I have found Turbo tax to be quite helpful. They can probably steer you in the right direction.
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Old Apr 24th 2013, 11:59 pm
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Default Re: T1135 Late Filing Penalty

Originally Posted by JonboyE View Post
The wording in the act is:

162(7) Failure to comply -- Every person ... who fails

(a) to file an information return as and when required by this Act or the regulations, or

(b) to comply with a duty or obligation imposed by this Act or the regulations

is liable in respect of each such failure ... to a penalty equal to the greater of $100 and the product obtained when $25 is multiplied by the number of days, not exceeding 100, during which the failure continues.


They will argue that if a T1135 is not completed or executed then it is not filed as required by the act.
Is there not a reasonable "fairness" obligation on the part of CRA that when they receive a tax return and assess it and notify the tax payer of the tax due, that if one of the forms was not completed correctly they should advise the taxpayer so they can correct the form promptly?
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Old Apr 25th 2013, 5:55 am
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Default Re: T1135 Late Filing Penalty

Originally Posted by JonboyE View Post
I agree it is a tough one to dispute. I assume 2011 was not the year you moved to Canada?

The instructions state if you file electronically you must send a hard copy of the T1135 by the due date. The penalties are automatic, there is no discretion allowed by the Act. You can appeal to the fairness commission if there are circumstances beyond your control that prevented you filing on time. It doesn't sound as if there is.

It is not much help now, but if anyone finds themselves in a similar position in the future it is best to do this under the voluntary disclosure program.
Is a letter to the CRA providing them with the completed forms not a voluntary disclosure? CRA say that voluntary disclosure allows taxpayers to provide information without fear of penalty but they have done the opposite.

http://www.cra-arc.gc.ca/E/pub/tp/ic07-1/ic07-1-07e.pdf
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Old Apr 25th 2013, 4:54 pm
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Default Re: T1135 Late Filing Penalty

To make a valid voluntary disclosure you have to follow the VDP rules and this includes filing the appropriate forms with the disclosure.

The IC you link to lists the three circumstances the CRA will consider waiving penalties and/or interest:

a) extraordinary circumstances beyond the taxpayer's control. I have lost more arguments than I have won with this. The two I have won involved i) someone who was hospitalized on April 30th, and ii) someone whose spouse died unexpectedly.

b) when the CRA were at fault.

c) they will sometimes waive interest (not penalties) if paying the interest would force someone into unacceptable poverty.

You can try writing to them saying you did file the T1135 on time and were merely following up with hard copies. I don’t see a down side to this, but I am not very optimistic.
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Old Apr 25th 2013, 6:20 pm
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Default Re: T1135 Late Filing Penalty

Originally Posted by jimf View Post
TurboTax generates the T1135 form in the set. The name/SIN etc are entered on the T1135 form automatically but none of the boxes are ticked and the form wasn't signed.
If you didn't actually check the boxes, then you didn't submit it, so at this point all you can do is throw yourself on their mercy. If you did check the boxes, I think it is de minimus and I would argue that.
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Old Apr 25th 2013, 7:36 pm
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Default Re: T1135 Late Filing Penalty

Originally Posted by Steve_ View Post
If you didn't actually check the boxes, then you didn't submit it, so at this point all you can do is throw yourself on their mercy. If you did check the boxes, I think it is de minimus and I would argue that.
After submitting the tax returns CRA provide a notice of assessment ie one each for myself and mrs jimf. Mrs jimf had no tax to pay I did. At that stage if the return was not complete then CRA should reasonably have notified us and identified that a $25 per day penalty was accruing? I paid tax over 4 months so received a number of notices over a period of months - at no time did these notices identify that there was anything deficient with the return. It's only when an honest voluntary disclosure was made they then decided to impose the penalty. Perhaps its a deliberate policy on the part of the CRA to not advise of any faults with a return until the 100 day limit is up so they can impose a maximum $2,500 penalty?
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Old Apr 26th 2013, 8:16 pm
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Default Re: T1135 Late Filing Penalty

Looks like it could be worth doing some research on this:

http://decision.tcc-cci.gc.ca/en/201...2012tcc73.html

http://www.thegatesofdawn.ca/wordpre...evenue-agency/
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