I wrote this letter to CRA today.
Dear Sir or Madam:
At the end of your General Income Tax and Benefit Guide – 2006, it says “Your opinion counts!” Well, here’s my opinion.
I’m a little bit pissed off. More than a little bit pissed off, actually. In fact, to put an exact figure on it, I’m precisely $2718.50 worth of pissed off.
“Why is Ron so pissed off?” you may ask. I’m that pissed off because that is the exact amount of the secret late-filing penalty plus interest that your Guide did not expend even a molecule of ink to warn me about.
Here’s what the Guide has to say about late-filing penalties: “The penalty is 5% of your 2006 balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months.” And that is just about all it has to say on the subject. A little bit about some higher fees that may apply if I was charged a late penalty in previous years, but I wasn’t, so that’s nothing.
“Fantastic,” says Ron. “I know my balance owing will be $0, so the penalty is $0, and I can just take my time with this.”
Poor, poor gullible Ron. He should not have taken the Guide’s word for it. He should have gone and read the Income Tax Act, Subsection 162(7)(a). If he had done that, he would have learned about the other penalty. The secret penalty.
162(7) Every person (other than a registered charity) or partnership who fails
(a) to file an information return as and when required by this Act or the regulations, or
(b) to comply with a duty or obligation imposed by this Act or the regulations
is liable in respect of each such failure, except where another provision of this Act (other than subsection 162(10) or 162(10.1) or 163(2.22)) sets out a penalty for the failure, to a penalty equal to the greater of $100 and the product obtained when $25 is multiplied by the number of days, not exceeding 100, during which the failure continues.
How hard would it have been for you to mention that? I know the Guide is not the law. But it is not fair for it to be downright deceptive. This is not some arcane subtlety that would affect one person in a thousand. This is big. A lie of omission is still a lie. You tricked me, and now I’m $2718.50 poorer. And that is why I am pissed off.
Sincerely,
Ron Harding
Did you ever get any satisfaction from the CRA? Never heard of this penalty before.
Not a peep out of them, as yet.
Ron: I also just got hit with $2500 fine under 162(7). I have for years been prepaying my tax on installments (at amounts that more than cover my liability) and then filing late. I was never assessed a late filing fee before. Any recommended actions. Can we discuss off-line?
I haven’t taken any actions to get my money back. Not really sure what could be done. It’s not like they have any motivation to act responsibly. What are you going to do? Fire them?
I just received my assessment back for 2005 (I filed two years late) and the penalty is 50% of previous year owing. I’m praying it’s a typo/mistake!
Probably should have filed your return on time then, huh?
This gets more interesting as even the big houses were unaware of this penalty. KMPG does my taxes and was 30 days late filing as there was no tax due, I just received my penalty notice, with interest on the penalty. If KPMG cannot get it right how is Joe average going to figure it out
My situation is exactly the same as yours. Have you or KPGM done anything in the way of an objection ie. form T400A to the chief of appeals as mentioned on your notice of assessment?
Thanks for letting me know about this Ron. I was wondering where to find why I was knicked so badly for not owing them anything.
I commend you for posting your letter online, Ron! I believe there are many of us struggling with CRA and feeling hopeless about the fact that we always lose and they always win. Yet, it’s hard to find blogs about these problems. In fact, twice GOOGLE suddenly needed to reload when I’ve searched for info. about CRA. ???
section 162(7) only applies if another section doesn’t. In the case of a T1 personal return or T2 corporate return, the 5% of your 2006 balance owing, plus 1% of your balance owing ON THE FILING DUE DATE for each full month that your return is late, to a maximum of 12 months.” The 162(7) penalty should not have been assessed – file an objection.
Note the exception in 162(7) “except where another provision of this Act (other than subsection 162(10) or 162(10.1) or 163(2.22)) sets out a penalty for the failure,”
My wife and I failed to submit the T1135 (for a home that we own in Florida)and were each assessed $7500 plus interest for 3 years. We now owe almost $17,000. There has got to be got to be some justice somewhere.
Mario, read the instructions for form T1135. A vacation home in Florida is PERSONAL property and not INVESTMENT property and therefore is not required to be reported. If you RENT the house during the times you are not there, this is a problem. Read up. Contest!
It would be totalling incorrect if BOTH of you were assessed the 162(7)(a)penalty on the SAME property.
Appears too late to file an T400A Objection form but you could write the Chief of Appeals in your Canadian residence. Also, call 1-800-959-5525 and discuss your situation and request address in Ottawa for the dept. that handles such cases. I think it is Ottawa Technology Centre but I am uncertain. Get full details on the penalty section on Google and pay special attention to the terminology EXCEPT WHERE OTHER PROVISION OF THIS ACT SETS OUT A PENALTY FOR FAILURE. (the possibility of this exception is a $100 penalty under 162(5) or (6) … I forget everything now that I am in my dotage. LOTSOF LUCK. Helen
Ah, you can file your T2 on time, as I did, and still be penalized. CRA seems to bank on the fact that the average small business person does not complain, but dutifully sends them a cheque. Same as stealing.
I just got a second Notice of Assessment charging me a penalty of $2,500 plus 179.42 interest for filing my NIL 2008 return 9 months late. The same day I got an application for Guaranteed Income Supplement! What they give with one hand they take away with the other. Furthermore, they knew I filed late when they sent me the first Notice of Assessment. How come they get 7 months with the interest clock running to let me know? This is a blatant money grab. I have never heard of anything like this and I know a lot of people who have filed years late. It is unconstitutional. Anybody with me?
Agree. The same is in my case. Are you going to do something?
Same happened to me. looks like a trick or trap to me. Someone got to do something
Agree too,
Sounds like a loan shark?
What happens next?
Do they send someone to break your legs?
I would have expected a reasonable interest rate on money owed and a $50 paperwork fee, not this.
On Dec 29, 2010 I filed an objection to personally being charged a $2500 penalty + interest for late filing of the insignificant and inconsequential form T1135 on a personal use property in England. I made six points. On June 23, 2011 I got a phone call from CRA saying they have reviewed my objection and have not accepted any of the points I tried to make. They said I can take them to Tax Court or go to Taxpayer Relief.
This penalty is totally unfair and unreasonable. Paying it goes against my sense of fairness. Fighting it is time consuming and demoralizing, however, it is the right thing to do. I just can’t let them get away with it without a fight.
So today I am spending my time preparing my Notice of Appeal to the Tax Court of Canada using the informal procedure. Unfortunately for others, if I am successful, this procedure is non precedent-setting! Nice of them isn’t it.
I am thinking of starting a T1135.ca web page and using facebook and twitter to expose this blatant and purposeless CRA money grab. Maybe CRA has pissed off a lot of people that would unite to fight this injustice.
As a 20+ year tax auditor I thought I knew my Income Tax–one of the penalty items was that it involved only late filing on taxable income. I bought in Mexico in 09 and did not file T1135 on April 30th (don’t consider it a TAX return — an information return only — had no taxable income on the T1135 but was charged maximum penalty on the late filing of T1135. Appealed. Got a letter from Appeals (not in the province of my residence) that they were swamped and it would take a YEAR beforre they got around to a decision on my case.
Today I got penalized for 2010 late filing — which showed losses — THERE IS NOTHING ABOUT THE t1135 that
INVOLVES TAXABLE INCOME. So how can such a penalty be applied? and if they have found some angle how can such a penalty be justified???? Unfortunately, unlike when I slaved there one must now call for an appt. and then be satisfied with nothing being done (at least at that level) Best bet — contact your member or parliament.
Just received a notice today for the late filing of the T1135. Maximum fine of $2500 + $97 interest. I can’t believe that so many people have the same issue. We just sold our house in the UK last year and have left the money in a UK bank account waiting to see if the dismal exchange rate would improve. We had a refund coming and I never expected this kind of penalty when we were just being honest to disclose it.
Where is the logic here? This is a pure grab by the CRA…. the penalty bears no resemblance to any impact on the CRA and can only be called disproportionate….Doesn’t that violate some kind of legal principle, which is often argued for limiting banking penalties?
I got in the same situation regarding late filing of T1135. I came to know now that I am not the only one. If each individual files the objection separately, I wonder why can’t we take class-action (altogether) and hoping it will make a difference? I am seeking for a lawyer to deal with this as it is not justifiable to me. Any one has successfully challenge CRA or know of a good lawyer who can help to challenge this? Would be great if you can share the info.
I too feel cheated out of 2500 plus interest after forgetting to file the disclosure form. I have duly filed the form for years, but forgot this time – an easy mistake to make since the tax program I used doesn’t spit it out automatically and CRA doesn’t send it to you. I owed no taxes and had just over the threshold amount sitting in a UK account making no interest whatsoever. Somehow the penalty seems way out of proportion.
I JUST WANT TO JUSTIFIED THAT REVENUE CANADA IS USING THE ACT 162(7)(a) INSTEAD OF THE 162(1).THE 162(7) SHOULD BE CONSIDER FOR BUSINESS AND NOT INDIVIDUAL AND I AM QUESTIONING IS THIS ACT GOVERNING THE LATE FILING PENALTY.I DONT THINK SO CAUSE A LOT OF LARGE ACCOUNTANT AND FIRMS ARE NOT AWARE. THEY SHOULD REMEMBER THE QUOTE DONT KILL THE GOOSE THAT LAYS THE EGGS.
FYI: There is a recent decision by Tax Court of Canada that might provide a precedent for trumping 162(7) with 162(1): Douglas v The Queen (2012 TCC 73):
http://decision.tcc-cci.gc.ca/en/2012/2012tcc73/2012tcc73.html
I got hit with the same thing. I lived overseas and knew I had nil owing so I did not rush to file my return. $2500 tax penalty for one year and $500 + interest for the next. What is the point of this other than a cash grab. If they wanted people to know about this they would inform us proactively. Not retroactively!
Take the matter to Tax Court. I did and I won because the judge understood there is no way to know that the penalty for a late filed T1135 is completely different than the penalty for late filed tax return.
Refer to my post 10/1/2011. I decided to object (waste of time) and then took CRA to Tax Cort of Canada and won!
google t1135+douglas and read about my successful appeal of the $2500 T1135 late filing penalty to the Tax Court of Canada.
Here is the judgement link:
http://decision.tcc-cci.gc.ca/en/2012/2012tcc73/2012tcc73.html
My advice, if you sincerely believe that CRA’s instructions have mislead you into a penalty situation, take them to court.
Thinking about putting details on the web – what do you think of the site name CrapBuster.ca (CRA penalty buster)?
I read the judgement. It looks good pretty well-reasoned. Not sure if I would be allowed to apply it in my own case. Part of the reasoning is that people with simple taxes they can do themselves cannot be expected to be aware of the surprising penalties for filing T1135 late.
My taxes aren’t simple these days. But I still do them myself. So, they might argue that it is irresponsible for me to do my own taxes.
And, why do they care so much about T1135 anyway? It’s just a trivial little statistics-gathering exercise, with no effect on the bottom line. I don’t get it…
My taxes are not simple either. For some reason the CRA lawyer brought my gross and net business income (I have been self employed all my life) into the case. I couldn’t figure out why because it has nothing to do with anything. However it helped me as my income is very low because I am semi-retired. The lawyer did try to say I should have used an accountant or got advice regarding the T1135. The judge thought that was ridiculous considering my low income. I pointed out that it was the 3rd year I had submitted the form and I had never seen any instruction regarding its ruthlessly enforced due date. I established it is common knowledge if you don’t owe tax there is no penalty for filing late. Taxpayer Relief provisions state that you have 3 years to file even if you expect a refund. Nowhere does it state that the T1135 must be filed by your tax due date regardless of any other factor AND this was not common knowledge in 2008 and still is not common knowledge. I established that no taxpayer can be expected to govern themselves in accordance with the ‘fine print’ of the tax code. I just kept saying I simply followed the instructions provided on the tax forms that tell you to file the T1135 with your income tax return. Go to court… everybody.