I read your article on Canadian voluntary disclosure and T1135 late filing forms. I wanted to ask about how I would go about filing these late forms given the changes to the program.
I’ve had my taxes done by a professional accountant in Toronto for many years. And although he was aware of my US investments (because I always report my income from these accounts) he has never mentioned or filed the T1135 forms for me. I stumbled across this myself and brought up the issue with him last week. He suggested we file the form going forward as the CRA will not figure out the forms are late. I’m not terrible comfortable in this approach and I need a second opinion.
Also can you please confirm that I will be able to use the simplified approach on these forms even though my investment accounts are in the US with Fidelity and UBS?
Thanks for the email. I would have to disagree with the approach your current accountant wants to take on the late filed T1135 forms. Maximum penalty for late filing these forms is $2,500 ($25 a day to a maximum of $2,500) and if you have multiple years to file the penalty and interest charges would be significant. There currently is a chance CRA will not ask for these late forms, however I would never want to take this risk considering the potential downside.
And yes, you are correct, the VDP program has changed quite a bit from the previous program. In our recent experience CRA is still quite reasonable in accepting late T1135 disclosures under the new program. That being said the eligibility under the program and specific of disclosure are quite different. You’ll want to flush out these requirements in detail with a tax professional before submitting late forms under the new VDP program.
Your T1135 filing requirements for your US accounts will unfortunately not be eligible for simplified filing. The simplified filing procedures will only be available for those taxpayers that hold US securities in Canadian brokerage accounts. You mentioned above that these investment accounts are with US brokers, therefore you’ll need to prepare T1135 forms using the detailed method. First, I’m assuming that your investment accounts with UBS and Fidelity are non-registered accounts and not IRA or 401k accounts. In this case you’ll be required to report the highest cost and year end cost of each security in each investment account in the US. Depending on how many securities you hold in your account this could be a significant amount of reporting. The fact that most US brokers will not be able to run reports to properly disclose this information compounds the problem. For this reason I tend to advise clients move their US investments to a Canadian brokers that can manage US and Canadian based investments. Furthermore most US investment advisors and wealth management firms cannot manage Canadian resident investment accounts.
I hope the information above has been helpful and please let me know if we can help with your late T1135s and VDP submission application.