What penalties can a voluntary disclosure actually get cancelled?
The application is aimed at penalties and at interest rather than at the arithmetic of the tax itself. For the 2025 tax year the CRA's late-filing penalty on an income tax return is 5 per cent of the balance owing plus 1 per cent of that balance for each full month the return is late, to a maximum of 12 months. Where the CRA had issued a demand to file and had charged a late-filing penalty in any of the three preceding tax years, it is 10 per cent plus 2 per cent for each full month, to a maximum of 20 months. The penalty does not compound. Interest does, daily, on the unpaid balance.
Am I too late to use the voluntary disclosures programme?
Lateness in years is not what closes the door. What closes it is the CRA beginning to act: the programme works while the disclosure is still voluntary, and once the Agency has started on a matter the relief available on that matter narrows. So a taxpayer who left it a decade and has heard nothing may be in a better position than one who left it two years and has a letter in hand. Read the correspondence first, decide the route second, and file third.
Does interest keep running while my disclosure is being processed?
The part of the exposure that grows is the interest, and it compounds daily on the unpaid balance. The penalty does not compound. That has a practical consequence for sequencing: once you can identify the tax with reasonable confidence, paying it down stops the compounding element from accumulating while the application is dealt with, even though the relief question is still open. It also means the cost of a slow, thorough application is not the same as the cost of a slow, idle one.
Which years do I have to include if I stopped filing years ago?
The scope is set by the failure, not by a number of years you pick. The application has to describe what went unreported and when the omission began, so the years follow from that: the income that was not reported, the information returns that were not filed, and the parties who held each obligation. Trimming the earliest years to make the application smaller is the common instinct and the wrong one, because an application that is later found incomplete puts the whole position back in question.
Will filing the late returns first spoil my disclosure?
The order in which the returns and the application are submitted is a decision to take deliberately, before anything goes in, not something to sort out afterwards. The programme is about a failure you are bringing forward voluntarily, and how a set of filings arriving on their own is treated is not the same question as how an application is treated. Settle the route and the sequence together, get both in writing internally, then file. Reversing the order later is not possible.
How much of the penalty is left after relief is granted?
It depends on which of the programme's two tracks the application falls into, and the allocation between them turns on how the failure came about rather than on the amount involved. So the narrative is doing more work than the arithmetic. What you can quantify in advance is the exposure you are trying to reduce: the penalties attached to each unfiled form or return, and the interest that has compounded on any unpaid tax. Quantify that first, because it tells you whether the application is worth the work.
What has to be reported on a T1135?
Specified foreign property held by a Canadian resident where the total cost exceeds the threshold at any time in the year: funds in foreign bank accounts, shares of non-resident corporations — including those held in a Canadian brokerage account — foreign real estate other than personal-use property, debts owed by non-residents, interests in foreign trusts, and foreign life insurance. Property inside a registered plan is excluded, as is property used in an active business. It reports property, not income. See the T1135.
My T3 or T5 shows foreign income — does that go on the T1135 too?
They answer different questions. The slip reports income you received; the T1135 reports property you held. Foreign income earned inside a Canadian mutual fund or ETF is reported on the slip, but the underlying foreign securities belong to the fund, not to you, so they are not your specified foreign property. Foreign shares held directly in your brokerage account are — even though the broker is Canadian and the account statement is in dollars. See the T1135.
