Lying to Revenue Canada about Foreign Property or Investments?

Revenue Canada and Foreign InvestmentWhether you’re preparing your personal tax return for 2014, or having a tax professional do it for you, there’s a possibility you might be lying to Canada Revenue Agency (CRA). It’s so easy to skip, or say ‘No’ to the question on the information page – Did taxpayer own foreign property at any time in 2014 with a total cost of more than CAN $100,000? Foreign property is not limited to real property such a condo in Florida that you use for personal and rental purposes.

Specified Foreign Property (SFP) includes:

  • Shares in foreign companies, even if held in a Canadian brokerage
  • Amounts in foreign bank accounts
  • Interest or units in offshore mutual funds

Property Not Included in SFP includes:

  • Property held in registered accounts such as RRSPs or TFSAs
  • Property used mainly for personal use i.e. vacation property, artwork, jewellery, boat

For examples of SFP see CRA website examples by clicking here.

If at any time in 2014 you owned SFP with a total cost exceeding $100,000 you must report it on the form T1135. If you have property close to the $100,000 amount in U.S. funds, you must convert that value into Canadian Funds which could cause you to exceed the $100,000.

Total cost refers to the adjusted cost base and not the fair market value. If you purchased a Florida condo in the year 2001 for $150,000 when prices were higher, but the property is now valued under $100,000 you must report it, if it’s not used for personal use solely.

This is an onerous task as you must also break down the specified foreign property by the country where the SPF is located. If you have shares of foreign corporations held with your Canadian brokerage accounts in the United States, Brazil, Hong Kong, etc., some of the details required in reporting are:

  • Maximum cost of the SFP during the year,
  • Cost of the SFP at year end,
  • Amount of income (or loss) related to the SFP,
  • Amount of any new capital gains (or losses) realized on the disposition of the SFP.

Penalties for Failing to File a T1135

The penalty for failing to file a T1135 return is $25 per day for up to 100 days (minimum $100 and maximum $2,500) for each year.  When failing to file is done knowingly or under circumstances amounting to gross negligence, the penalty is $500 per month for up to 24 months (maximum $12,000), less any penalties levied. There are additional longer term penalties that you can look up if applicable.

Voluntary Disclosure Program (VDP)

If you determine you should have said ‘Yes’ to the SFP question on the information page of your tax return you may still have time to correct the problem. Under the VDP you can voluntarily correct inaccurate, incomplete, or unreported information, and do so without penalties or prosecution, if a valid disclosure is made to Canada Revenue Agency (CRA). To be a valid disclosure it must include all 4 of the following conditions:

  • Must be voluntary
  • Must be complete
  • Must involve the application or potential application of a penalty, and
  • Must include information that is more than one year overdue.

It will not be considered a voluntary disclosure if you know the CRA has already contacted you with a request for information that would uncover the information to be disclosed. If CRA accepts the disclosure as valid, taxes and interest will still be payable. The relief will be in the penalties that you do not have to pay.

I would be interested in hearing from you if you have questions, need assistance or have attempted to gather the information required to complete the form, and what challenges you had in that process, and completion of the T1135.

As always, you can connect with us via email or telephone, leave a comment here on the site or click the Contact tab at the bottom of the screen if you are reading this post on the website.

Until next time,

Maureen

3 Questions to Ask a Prospective or Current Bookkeeping Provider

bookkeeping expert NewmarketThis is the time of year when many small and medium size business owners decide they need to get a better handle on their bookkeeping. Perhaps you want to get your 2014 bookkeeping up to date and you don’t want to do it yourself, or you want to start 2015 with a professional taking care of your bookkeeping needs so you can focus on your business. As you move forward into the New Year, here are 3 questions to ask a prospective or current bookkeeping provider:

1.  Do you offer fixed price invoicing?

Fixed pricing is an agreement between you and your provider which details what and when you the customer, will supply your provider with information. It also details what the service provider will do with that information. Whether it’s: Continue reading

3 Problematic Responses to Probing Bookkeeping Questions

bookkeeper NewmarketIn the last few weeks I’ve had an unusually large number of inquiries about hiring us for our accounting, bookkeeping and tax services. And as much as business owners need to ask numerous questions (which I strongly encourage), I also have a responsibility to ask numerous, sometimes probing questions. This ensures that I can help them make informed decisions and give them a sense of direction if something is not correct. Here are 3 recent questions that I asked and the problematic responses. P = Problematic. Continue reading

Tax Audit from Hell? – Part 2

bookkeeper NewmarketA couple of weeks ago I thought this would be part two of a three part series, even though it was originally planned for two. But thankfully it appears we’re on the final leg of this very long and stressful journey. Let me take you back as to why this has been the tax audit from Hell.

In my previous blog, I finished with the auditor’s request for a 2011 personal breakdown of expenses and income. And, the income wasn’t just related to T4s and Child Tax Benefits. It related to every deposit made to all of their bank and investments accounts along with that of their children for all of 2011. The auditor wanted closing balances of all their accounts at 2010 and opening balances for 2012 which included but wasn’t limited to: Continue reading

Are you Prepared for an Audit from Hell? – Part ONE

bookkeeper NewmarketIn early May 2014 I received a call from a long-time client of mine. They just received a call from Canada Revenue Agency (CRA) saying they were being audited for the year 2011. My client is sharp. He didn’t panic or get angry, but simply asked “how do I know who you really are based on a telephone call?” And, “I want your request in a letter before I do anything further”. My client also contacted their CA as they weren’t sure who was to do what, and what was to happen next. Little did we know this would become the Audit from Hell for both my clients and me. Continue reading

5 Tips & Tricks for QuickBooks Online (QBO)

QuickBooks Online Pro Advisor NewmarketIn the past month I’ve spent numerous hours training new and transitioning clients in QuickBooks desktop and QBO. While some are new to either version, I’ve found those transitioning from the desktop version to the online version experiencing a bit of a culture shock. To ease the transitioning hiccups, here are 5 tips and tricks for QBO to make the entering and retrieving of information go a little smoother.

1. In order for you to allocate the GST/HST in QBO you must first set-up Sales Tax. You do this by selecting the Sales Tax tab from the menu bar and follow the on screen guidelines. QBO then automatically adds two default accounts; GST/HST Payable and GST/HST Suspense. You cannot allocate a payment amount directly to the GST/HST Payable account. But, you can allocate it to the GST/HST Suspense account. If you can’t easily relate to the word Suspense you can rename it to something that will be more familiar to you i.e. Clearing. Continue reading

Time to Move from QuickBooks Desktop to QuickBooks Online (QBO)?

QuickBooks Pro Online Advisor NewmarketI don’t know whether it’s customers getting into the fall routine, and their business mindset from disappointing summer weather, or the marketing Intuit is doing, but I’ve received a lot of inquiries from new and current customers about QuickBooks in the cloud. The question being; is it time to move from QuickBooks desktop to QuickBooks Online (QBO)? Continue reading

Reducing Canadian Payroll Taxes with a Tax Waiver

reducing taxesIt makes a world of difference to all business owners in surrounding themselves with intelligent and professional associates. Carolyn Bogseth is one of my associates that I certainly respect for her intelligence and genuine desire to help those she meets. Whether they are her clients or someone that would like a general investment question answered she will take the time to assist those who contact her. Below is an excerpt from her recent newsletter outlining how reducing payroll taxes can help you. Continue reading

2 Great Accounting Software Deals for Businesses

cost savingsI’ve been in the accounting, tax preparation and training business for a number of years. And over those years, I’ve developed some great relationships with customers and vendors. So it has to be big for me to get excited about sharing these 2 great accounting software deals for businesses.

Whether our businesses are operated by a single person or 20 employees, we all have challenges. For the purpose of this blog I’m referring to great software at a good price and handing over the responsibility of payroll to a 3rd party provider.

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QuickBooks 2014 Payroll Update

quickbooks-basic-payrollI’ve received a number of emails lately regarding problems updating QuickBooks 2014 Payroll. Even though customers are registered for QuickBooks payroll, the automatic updates are not recognizing payroll which expires June 30, 2014. At our office some of the computers updated payroll automatically with an expiry of December 31, 2014 while others didn’t. We are all on the same Windows operating system.

When I contacted QuickBooks their only suggestion was to go to their website and manually download the update. No other explanation was supplied. Make sure your QuickBooks file is closed first! Here is the link for the manual update for various versions.

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