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
56 responses to “Pissed off at Canada Revenue Agency”
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?
At KPMG, you’re just a number. There seems to be less of personal attention to your situation. I would recommend that next time, you make every attempt to patronize a smaller accounting firm but ensure that the practitioner is a certified accountant.
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.รขโฌย 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
Hi Mario,
We are in the same boat…bot a home in FL a few years ago, and just got an assessment for $2700ish each. How can a regular couple afford a $5400 hit out of the blue? We’re not rich by any means! Curious if you appealed and what happened, since our situations are very similar. We have never owed personal taxes, so this little unknown tidbit is so unfair it makes you wonder what kind of country we live in. $2500 penalty seems like something for a big company, not citizens.
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.
Hi Bruce,
My husband and I were both hit $2500 each for the same property. Exactly the same circumstances as you – first year owning the house, no tax owed, thought we could file the form with our taxes, etc.
So we went through the 1st and 2nd CRA reviews, both were denied even though we quoted your case (they claim your case was an informal procedure and not meant to set precedent). Now they tell us our next step is Federal Court. How did you know to go the Tax Court rather than the Federal Court?
Thanks for getting your case publicized. We first saw it in the local paper shortly after we got hit the $5000+.
Bruce, you’re a hero.
I don’t know what the hell kind of country this is. I’d never heard of the rule (my tax girl was clueless), just read about it on internet, and 4 days later filed the amended return (where I answered “yes” instead of “no” to the trick question about owning the foreign property), and the T1135. When the tax girl phoned CRA they said it’s an automatic $2500 penalty plus interest. Someone has got to stop the CRA – they are out of control. Like everyone’s saying here, $2500 because you didn’t file their trick form? Looks like Tax Court, here we go.
Beware: it’s no good even when you voluntarily send the T1135 afterwards (didn’t realise US shares are foreign property). I just got TWO penalties! I don’t pay tax for low income and don’t owe tax (income already reported before). Go figure.
The court cases I can find online include:
The 7 Asper companies (2010 FC 897);
Leclerc (two penalties for 2003 & 2006);
Sandler v. AG (2010 FC 459)
Seabrook et a. v. TQ (2009 TCC 532) and
Douglas v. TQ (2012 TCC 73) – the case mentioned above
There are differences in my case to the above so I sent off an objection today as a formality (pre-requisite for Court) and expect to end up in Court.
The CRA document P148 says interests will continue to accrue while you object and if CRA does not give you a decision in 90 days you can go to Court. I’m not going to wait around.
UPDATE:
Objection successful, got my refund cheque but no interest added. Relieved but not ecstatic. These people at CRA are seriously out of order!
I got the same shock as everyone else when the mail came yesterday. I can’t afford not to fight it. ‘Another victim,’ did you pay the fine and then get a refund when your objection was successful? I don’t want to rack up more interest in case I end up losing so maybe I should scrape up the cash and pay now. Also, how did you avoid having to go to tax court? Any advice as I begin my fight?
Thanks!
Courtney,
Yes I paid the penalty plus interest within the deadline.
You didn’t give details but I typed a long letter as Objection arguing many points that I could think of based on this page, mainly that I do not owe tax, I submit the form voluntarily and there’s nothing in the guide saying there would be a heavy penalty if you don’t owe tax or submit voluntarily.
If the Objection is successful there’s no tax court to go to. When I initially phoned the CRA I was advised to try the Taxpayer Relief but I thought that might lead to a dead end because the route to tax court would be via an Objection. There is a time limit to raise an objection and I couldn’t risk it with trying the Taxpayer Relief.
Best of luck.
I was unaware that US Stocks bought through Canadian Brokerage firm are to be included on form 1135 if it exceeds the threshold of 100K. I had previously submitted Forms T3 and T5 and paid taxes on foreign income (earned few hundred dollars in dividend income). I sent Form 1135 nine months past due date to VDP as well as CRA. Few days ago received a letter that I do not qualify for VDP as information disclosed is not at least one year past due. Today I got a letter for penalty plus interest totaling 2603.61. It seems the situation is similar to Another Victim.. and Bruce.
Will pay off the penalty with interest for now. I do not meet any of the criteria listed for Taxpayer Relief. So, will soon have to file Form T400A.
It seems the next step after this is to start preparing Notice of Appeal to the Tax Court of Canada using the informal procedure. Any advice on what points to be included in this Notice apart from accepting my ignorance of the US stocks disclosure requirement (inspite of diligently paying taxes on income earned from them).
I read that when IRS started sending notices to US Citizens staying in Canada for failing to submit FBAR, our people had lobbied not to be harsh on these law-abiding citizens. They would already have paid higher taxes to CRA, and likely no tax is due to IRS (as Canada tax rate is higher than US). I hope we are able to generate similar support for ourselves.
Just got one for 2010. $2500 plus $208.24 interest. My circumstances are much the same as Bruce’s so I’m hopeful about an appeal, but am waiting for my wife to get notice of a similar penalty for the same property! Bruce, thank you for fighting this ridiculous tax grab. I will also be letting my MPP know my views.
I am a tax accountant and have been in business for 40 years and these penalties are contrary to the spirit of the tax act and unfair. I also have a client that has been assessed the $2500 penalty and plan on appealing and going to tax court if necessary. My client filed his returns electronically including the T1135 form. CRA states that the T1135 form is to be mailed separately and therefore the penalty is properly applied. I will be discussing this with CRA to see if in fact CRA cannot view this form electronically. Also the client clearly marked the box stating he has over $100,000 in foreign investments and included the foreign income accordingly. As far as I am concerned this is adequate information for CRA to go by and therefore the penalty is a gross unfairness. I will update this information as I go along and may even set up a website to see how many Canadians have been hit unfairly with this penalty. The CRA policy in this regard needs to changed and changed retroactively.
Update
I objected to my penalty but paid just in case. It took a long time, but I recently got a letter from the CRA saying my objection was allowed in full, yeah!! A reassessment was sent and I am expecting a check soon. I am so relieved!
Thank you for this forum, Ron. Thank you to everyone for adding their ideas and information about their situations and results.
Courtney
Where did you send it?
Many thanks
amanda
Hi
What is the best route to object. i have just listed my reasons for filing late, wont bore everyone with the details, but don’t know where to send it. CRA has given different addresses and to be honest I don’t trust that any of them know what they are doing!
Cheers
Amanda
Courtney, give us details. Can you post your arguments? Was your objection though the Form T400A procedure? Or did you go to court?
Wow! We thought we were alone in this! For the past several years my husband has been dealing with audit of his consruction business. We were a small firm working professional government jobs. ( never paid in cash only by cheques ) We were required to hand over all our personal bank statements… I guess they were trying to find out if we were taking undocumented unclaimed cash from clients. Guess what only one thing was discovered that I being the spouse could not account for… In our search by going 7 years back I received a cheque from …. Wait for it… From them! Haha to date we are in the process of going to tax court. The only thing they could find was that my husbands company vehicles all were purchased by him personally then payments were made by the company, all was documented by a professional accounting firm, at no time did we personally drive 8 vehicles at the same time on the same day. . We had our own personal family truck and car. ( when you are a new business a bank will not loan money until a business has been operating for 5 years) our men and supplies needed trucks to operate our business, everything was professionally documented for 5 years! All maintenance, receipts, gas, GST, PST , milage was recorded etc. But guess what?! They took it all out of company and added it onto our personal tax years! Five years of 8 truck loans, gas, taxes, vehicle repairs. You can not imagine what this adds up to! They are requesting that we pay up right now! We haven’t received our total from them yet only estimates. We have now sold everything from the business to pay them! All documented of course! We have taken out a 100,000.00 loan to go to tax court because if your personal and business are melted together because of tax court then a tax payer must Hire lawyer representation or you can’t file for court. We have to fight this or we have to go bankrupt! We are In our late 50’s have worked so hard, never cheated anyone let alone the CRA! I would be willing to join a tax payers lobby group.! As tax payers we need to act together! We are not criminals! I would love to know if any other small companies have had this happen to them.
I forgot to mention that we were advised to wait for our final assessments in order to submit this years income tax. Our problem is that we are so broke from paying the accountants and lawyers, business tax etc . That we can’t file until our personal loans come through. We know our company has made zero for the last four years as we sold everything to pay company taxes etc. we have both taken jobs working for other companies. This is has been a nightmare! We will never recoup our business assets etc even if we win in court. Our tax lawyers are pretty confident that we are going to win on two out of three issues. By then we will have sold our only asset left… Our family home.
R pollon, I like you to realize that if your company is paying for your vehicle(s), that are under your name, it should be counted as personal income. And for you to not report this, it is no other than misreporting personal income and evading tax.
I do not know if your husband intentionally committed this offense or not. But what you should have done was either count them as personal income if you wanted ownership of the vehicle, OR write it as company expense/ asset. The latter being the obvious and wise choice. You would have been able to record them under asset, write the maintenance as expense, and record the depreciation of the vehicles over the years.
This is basic high school financial management stuff. I have serious doubt about the quality of this so called “professional accounting firm” if the accountant did not see this red flag right away.
It is very unfortunate that your life is in ruins because of this mistake you made. I assure you, you are not the first person I’ve met who has done this. I feel sorry for your misfortune and I hope you the best.
I got into some trouble with the CRA between 2000 and 2005 due to a business that just wasn’t working. An assessment in 2006 revealed that I owed the CRA approximately $37,000.00 which I do not dispute. Since then I have payed over $64,000.00 on this account and the CRA is still demanding a further $30,000.00 to settle it, for a grand total of $94,000.00.How’s that for loan sharking?
Savvy article . I learned a lot from the analysis . Does anyone know if my business might find a sample 2014 AU Form 1263 version to complete ?
I just received a penalty for having submitted my T1135 59 business day after the deadline. Still got 2100$ penalty + 92$ interests. I don’t how they come up with that ammount, I thought it was 25$/day (59*25=1475$, not 2100$).
I submitted the T1135 form at the same time as my tax form and wasn’t owning any taxes so I didn’t hurry to submit on time.
Any chance to get a template of objection letter ?
I’m in the same boat: Just got a penalty letter yesterday for tax year 2015, even though I already received a refund 12 months ago. I have been using an accountant and apparently he didn’t know about the rule either. This thread has been helpful — even just knowing I’m not the only one caught up in this bizarre, unpublicized rule. If Courtney is reading this … I’d love to see your objection letter. Or if anyone else is aware of other resources (did Bruce ever create that FB page?) I would be most appreciative.
Mike, I am with you. I filed the form for 2015 but in December. I was extremely busy during tax season in 2016 and so was my accountant. I asked what needed to be done and he said no rush since I was getting a big refund.
Does anyone have any letters, etc. they put together on this? Would appreciate it. please send to drewin________ (filled in below)
It seems the tax court is the best option, agree? Has anyone filed the RC4288 and gotten a reduction?
End of email is _______mesa@yahoo.com
drewinmesa
Hi
I am in the same situation owing CRA $550 for 24 days late foreign tax. Can some advise me what to write in RC4288 form or Request for Taxpayer Relief form.
thanks
Jag