CRA is asking about my foreign bank account — what do I do?
Answer the question that was asked, and find out first what sits behind it. These enquiries usually begin from information already held — account data exchanged between administrations, an entry in a property registry, a slip — so the letter is rarely a general fishing exercise. Establishing what prompted it tells you which facts are already known, and in what form. Only then is a response drafted, and it is built from documents: where the funds came from, what the residency position is, and what treaty relief was claimed. A quick reassuring reply is usually what creates the next problem.
How did the CRA find out about my overseas account?
Usually because it was told. Financial account information is exchanged between tax administrations, property ownership is a matter of public record in many countries, and slips are issued and reported in both directions. Money remitted into Canada leaves a trail of its own. The practical consequence is that the enquiry you are answering is generally being matched against a figure somebody already has, so an explanation that cannot be reconciled to that figure will be noticed. Working out what the file is likely to contain comes before deciding what to say about it.
Do I have to declare foreign income I already paid tax on?
Yes, because reporting and taxing are separate steps. The income is reported first, and relief for the foreign tax paid on it is then claimed, with the relief depending on the type of income, the country, and the treaty. That is why an audit of foreign income is so often an audit of a claim rather than of an omission: the income is on the return, and the question is whether the relief taken against it was correctly computed and supported. What supports it is the foreign assessment and evidence of the tax actually paid.
Should I tell the CRA everything or just answer what they asked?
Answer what was asked, accurately and completely, and ask what is in issue where that is unclear. The instinct to volunteer a full account of a family's financial history usually produces a document that contradicts something the authority already holds, and an inconsistency is much harder to deal with afterwards than a gap. There is nothing improper about asking an auditor to identify the years and the items under review; that is the ordinary way a scope gets established. Completeness in the answer matters. Unprompted narrative around it does not.
What documents will CRA want for my foreign income?
Broadly three sets. Documents showing where the funds came from: inheritance papers, sale documents, loan agreements, remittance records. Documents establishing the residency position for each year in issue, since that decides what was taxable here at all. And documents supporting any treaty relief or foreign tax credit claimed — the foreign return, the assessment, and evidence of tax paid. They are far more useful presented in a structure matching how the enquiry was framed than as a folder of everything, because the point is to let a reviewer tie each figure to a document.
Can a foreign income audit turn into a penalty matter?
An enquiry about foreign income can widen — into earlier years, into unfiled information returns, or into a penalty position — and how it is answered affects whether it does. Two things widen a file: inconsistency and silence, meaning an explanation that does not match the information held, or a request that has to be chased. Where an audit has turned up something genuinely unreported, the relief routes open to you are narrower than they were before contact was made, which is a reason to take the position seriously at the first letter rather than the third.
Do Canada and the United States share tax information?
Yes, through more than one channel. The treaty has an exchange-of-information article that supports both routine and on-request exchange. Separately, an intergovernmental agreement has Canadian financial institutions identify US-reportable accounts and report them to the CRA, which passes them to the IRS, with the reverse flow for Canadian residents. Most other country pairs use the Common Reporting Standard for the same purpose. See FATCA reporting.
What happens if I have not filed for several years?
Missed years are handled as one package, not one at a time, because the route chosen for the first year determines the relief available for the rest. Each country has a disclosure or relief programme with its own conditions, and entering the right one — before the authority contacts you — is usually what keeps penalties down. Filing quietly outside a programme forfeits that protection. See catching up on missed returns.
