CRA T1135 Penalties: What a Missed Foreign Property Report Costs, and the Three Ways to Fix It

A Canadian resident whose foreign property (US accounts, US stocks, a US rental, a foreign corporation's shares) cost more than $100,000 at any point in the year must file Form T1135 with the T1. The penalty for a late T1135 is $25 a day to a maximum of $2,500 per year, and that is the tier most late filers face. Two higher tiers exist: $500 a month to $12,000 where the failure was knowing or grossly negligent, and $1,000 a month to $24,000 after the CRA demands the form, plus a further penalty of 5% of the property's cost where the form is more than 24 months late and the failure was knowing. A missed T1135 also extends the CRA's reassessment period for the year by three years where foreign income was omitted. The fixes, in order of protection: the Voluntary Disclosures Program before any CRA contact, taxpayer relief where the penalty has been assessed, and simple late filing where the exposure is the base tier and the CRA has not written.

Key takeaways

• The requirement: a T1135 is due with the T1 (April 30, or June 15 for the self-employed) for any year in which the total cost of specified foreign property exceeded $100,000 CAD at any time. Specified foreign property includes foreign bank and brokerage accounts, foreign stocks (including US stocks held at a Canadian broker), foreign rental real estate, foreign corporation shares, and debts owed by non-residents; it excludes personal-use property (a vacation home not rented), property used in an active business, and registered plan holdings (RRSP, TFSA, RESP holdings are exempt).
• Tier one: $25 a day, maximum $2,500, for each late year.
• Tier two: $500 a month, maximum $12,000, where the failure was made knowingly or under circumstances amounting to gross negligence.
• Tier three: $1,000 a month, maximum $24,000, after the CRA has served a demand to file.
• The additional penalty: where the form is more than 24 months late and the failure was knowing or grossly negligent, 5% of the cost of the property (less the tier penalties).
• The extended reassessment period: if the T1135 was not filed (or was filed late) and income from the foreign property was omitted from the return, the normal three-year reassessment period is extended by three years.
• The fixes: VDP (full penalty relief and partial interest relief, before CRA contact); taxpayer relief (Form RC4288, discretionary cancellation, within ten years); or filing the late forms and paying the tier-one penalty where the facts are simple and the CRA has not written.

Who has to file

The threshold is cost, not value, and it is aggregate: all specified foreign property together. A Canadian who moved from the US with a $120,000 US brokerage account files; a Canadian who holds $80,000 of US stocks and a $30,000 US savings account files; a Canadian whose US rental cost $150,000 files (a US vacation home used only personally does not count, but one rented for any part of the year does). Holdings inside an RRSP, RRIF, TFSA, or RESP are excluded. Property held in a Canadian corporation is the corporation's T1135. The form has a simplified method for property under $250,000 at cost (by category and country) and a detailed method above it (by property).

The most common miss: US stocks held at a Canadian brokerage. They are foreign property (shares of non-resident corporations) even though the account is Canadian. Many Canadians assume the Canadian account means no T1135.

The penalties in operation

$25 a day. Assessed automatically on a late T1135 for each day late, capped at $2,500 per year. A form three years late is $2,500 for each of the three years. This is the ordinary case, and the CRA assesses it on late filing without a demand.

$500 a month. Applies where the CRA finds the failure was knowing or grossly negligent: a taxpayer who was told to file and did not; a taxpayer with large foreign holdings and a professional preparer who omitted the form for years; a pattern. Maximum $12,000 per year.

$1,000 a month. After the CRA serves a demand to file under subsection 233(1), the penalty for continued failure is $1,000 a month, maximum $24,000, and applies whether or not the original failure was knowing.

The 5%. Where the form is more than 24 months late and the failure was knowing or grossly negligent, an additional penalty of 5% of the property's cost, reduced by the other penalties. On a $500,000 account, $25,000.

Reassessment. The CRA's normal reassessment period is three years from the original assessment. Where the taxpayer failed to file the T1135 when required and failed to report income from the foreign property, the period is extended by three years (to six), giving the CRA time to find and assess the omitted income.

The fixes

Voluntary Disclosures Program. A disclosure of the missed T1135s (and any omitted foreign income) before the CRA has contacted the taxpayer about it, meeting the program's conditions (voluntary, complete, involving a penalty, and information at least one year past due). Relief: no penalties (including T1135 penalties) and partial interest relief; the omitted income is assessed with interest. The 2025 changes to the VDP distinguish unprompted applications (full penalty relief and greater interest relief) from prompted ones (after a CRA letter or education campaign, with reduced relief). For a taxpayer with several years of missed T1135s and unreported US income, the VDP is the route.

Taxpayer relief. Where the penalty has been assessed (the taxpayer filed late and received the $2,500 assessment), Form RC4288 requests cancellation under the CRA's discretion for circumstances beyond the taxpayer's control, CRA error or delay, or financial hardship, within ten years. The CRA grants relief for illness, disaster, and CRA error readily and for "I did not know" rarely; first-time filers with a reasonable explanation sometimes succeed.

Late filing. A taxpayer with a single missed year, all income reported, and no CRA contact can file the T1135 late and pay the $25-a-day penalty (or request relief). Where income was omitted, this is a quiet disclosure and the VDP is preferable.

Coordination with the US side

A Canadian resident who is also a US person, or who is catching up on both sides after a move, files the CRA VDP and the IRS streamlined submission in the same project: the T1135 for the Canadian years and the FBAR for the US years cover the same accounts from opposite directions, and the two agencies share information.

Worked example

A Toronto couple who returned from Chicago in 2020 kept a $340,000 US brokerage account (US-listed ETFs) and a $60,000 US savings account, reported the income on their T1s, and never filed a T1135.

• Requirement. Cost above $100,000 from 2020; five missed years (2020 to 2024); the detailed method (over $250,000).
• Exposure. Tier one: $2,500 per year, $12,500. Income was reported, so the reassessment extension does not apply. No demand issued; no knowing failure indicated.
• Fix. The CRA has not written. Options: VDP (unprompted; full penalty relief; the disclosure is complete because no income was omitted, and the program accepts T1135-only disclosures) or late filing with a relief request. VDP chosen; five T1135s filed under it; no penalty.
• Going forward. T1135 annually with the T1; the US accounts stay.

Official sources

The CRA sets the T1135 penalties as "$25 per day for up to 100 days (minimum $100 and maximum $2,500)"; where the failure is knowing or grossly negligent, "$500 per month for up to 24 months (maximum $12,000)"; after a demand, "$1,000 per month for up to 24 months (maximum $24,000)"; and after 24 months an additional penalty of 5% of the cost of the property. The normal reassessment period is extended by three years where foreign income was not reported and the T1135 was not filed on time. — Canada Revenue Agency, Foreign Income Verification Statement – Penalties, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/foreign-reporting/foreign-income-verification-statement.html

Effective October 1, 2025, the CRA's Voluntary Disclosures Program grants an "unprompted" application general relief — "75% relief of the applicable interest" and "100% relief of the applicable penalties" — and a "prompted" application partial relief — "25% relief of the applicable interest" and "up to 100% relief of the applicable penalties"; in both cases the tax owing must be paid. — Canada Revenue Agency, Voluntary Disclosures Program, https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html

The CRA states that for penalties it "will consider a request only if it relates to a tax year or fiscal period ending in any of the 10 calendar years before the year in which you make a request," and the same ten-year window applies to interest; the request is made on Form RC4288 under the taxpayer relief provisions (Information Circular IC07-1R1). — Canada Revenue Agency, Cancel or waive penalties and interest, https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/cancel-waive-penalties-interest.html

Practitioner note

The T1135 is the Canadian form that mirrors the FBAR, and it is missed for the same reason: the account is 'just' a US brokerage account. The base penalty is $2,500 a year and the VDP removes it entirely if it is filed before the CRA writes. We file the missed years under the VDP as part of every return-to-Canada file, and we check the T1135 threshold every year for every client with US holdings.

See also: For the full picture of what each agency charges, see late-filing penalties on both sides of the border, and browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the missed T1135 filings under the Voluntary Disclosures Program or with a taxpayer relief request, and the annual T1135 going forward. See cross-border pricing or book a call.