I have foreign assets and didn't file a T1135 — how serious is this?

The T1135 (Foreign Income Verification Statement) must be filed by Canadian residents who own "specified foreign property" with a total cost of more than $100,000 at any time during the year. Specified foreign property includes foreign bank accounts, shares of foreign corporations, bonds issued by foreign entities, and real property located outside Canada (other than personal-use property).

Failure to file a T1135 or filing one late triggers automatic penalties under the Income Tax Act. The penalty is $25 per day for each day the return is late, to a maximum of $2,500. Additional gross negligence penalties can apply if CRA concludes the failure was willful or grossly negligent. For foreign assets over $100,000, the potential penalties can accumulate quickly.

CRA has stepped up T1135 enforcement and has data-sharing arrangements with foreign tax authorities and financial institutions. If you have not filed required T1135 forms, the Voluntary Disclosures Program is available to come into compliance before CRA contacts you — it can eliminate or reduce the penalties associated with late filing, though you will still owe interest on any unreported foreign income.