Filing form T1135 late to report out of country investments

My question is: Canadian-specific

QUESTION: Dear Sir/Madam:

I trust that I am directing this query to the correct person.

My wife and I have had the same Certified General Accountant filing personal income taxes for my wife and myself for the past five years. We have had a rental property in the U.S. for some time and along with filing the regular Personal Income Tax my accountant has submitted a T1135 Foreign Income Verification Statement.

Last April 26th on filing our Personal Income Tax Forms our accountant gave us a our copy of the files. Later at home upon reviewing these files my wife noted that the T1135 Foreign Income Verification Statement has not been signed by myself. She called our accountant to query this and to ask if the form had been submitted to Revenue Canada on our behalf. The accountant advised her that the signing of this form had been overlooked and asked that one of us come in to his office to sign the form and he would submit it to Revenue Canada. My wife who has my Power of Attorney attended at the office of said accountant on May 5/2006 and after signing the T1135 was advised that the form would be sent off to Rev. Canada. However, although signed on May 5th, 2006 it appears that Form T1135 was not sent until Sept 15, 2006! This we were not aware of until this year 2007.

We were away on from our home in December & January and upon returning and picking up our mail from Canada Post there was a Notice from Revenue Canada advising us of the late filing of Form T1135 and advising us of a late penalty of $2,500.00 plus interest of $137.40. This was the first and only notice we had received from Revenue Canada. My wife immediately phoned our accountant to query this and was asked to send a Fax copy of Revenue Canada's Notice to his office; which she did.

In the past my wife and I have complied with all neccessary requirements for Income Tax filing and do not feel that we should be penalized for the oversight and/or neligence of our accountant and/or his staff.

Our accountant has advised us that Revenue Canada has never in past history given a penalty on the late submission of FORM T1135........and that is the first time Revenue Canada has done so. He does not appear willing to intervene with Revenue Canada on our behalf and has suggested that we attend at the office of our local Member of Parliament and see what he can do to alleviate this matter.

My Questions to you are:
1. What responsibility does our accountant have in this matter?
2. Since it was our accountant who was late filing this document shouldn't he be the one to contact Revenue Canada on our behalf ?
3. What recourse is available to me to cover this loss (We are both pensioner's and $2,637.40 is a great deal of money in our financial position)
4 Would our accountant's errors and omissions insurance cover this fee?

I anxiously await your response and thank you in advance.



david ingram replies:

This is the first year that I have seen Revenue Canada issue a fine for form T1135 and I have only seen one. In that case, the client was clearly late by bringing his return with a refund in at the end of August as he has done for years. I thought it patently unfair that the fine was levied and filed a request for its cancellation with the Fairness Committee. I have not yet received a reply. The due date for the T1135 is April 30th, even if the person is self employed and his or her return not due until June 15th.

Your accountant is correct in that this is the first year and he or she had no particular reason to think that there would be a fine.

At the same time, if you signed it clearly on May 5th, it should have been sent at that time.


One From the sounds of it, the T1135 went in unsigned with the original return. Under those circumstances, I believe that the Fairness Committee would cancel the penalty. Get your Accountant top write a request.

Two I do not see any reference to your having filed your US 1040 and a state return if in a taxing state. Failure to file the 1040NR can result in $10,000 penalties for failure to file PLUS 30% of the gross rent collected on a US rental property. If you have not filed your US returns because you were losing money and someone told you that it was not required if you were losing money, you need to get that fixed right away.

That, of course, is what we do.

I have not addressed the responsibility of the accountant in this specific case because I have only one side and I still remember an inappropriate comment made by Judge Brenda Brown when she had only heard one side in a divorce case.

Comments (0)

CEN-TA Cross Border Services - Tax, Visas, Immigration