How much is the penalty if I file T1135 late?
Two different charges get confused here. The charge on a late information return is worked out by reference to the form and the length of the delay, so it does not depend on tax being owed. The late-filing penalty on the income tax return itself is a separate charge that does depend on a balance owing: for the 2025 tax year it is 5% of the unpaid amount plus 1% for each full month the return is late, to a maximum of twelve months. Establish which charge has actually been applied before working out what is payable, because the two answer to different arguments.
Is there a penalty if I owed no tax that year?
There can be. The foreign income verification statement reports property, not income, so a year in which the property earned nothing and no Canadian tax was payable is still a year the form was due if the threshold was crossed on cost. The charge for filing it late is not calculated from tax, which is exactly why an unfiled nil year can be expensive. The practical consequence is that you cannot sort unfiled years by how much tax was at stake. Each year has to be tested against the reporting threshold on its own facts.
Does the T1135 penalty keep compounding until I file?
The penalty itself does not compound. What compounds is interest, charged daily on an unpaid balance, and that distinction changes how a long-standing file should be handled. On the income tax return the 2025 late-filing penalty is also limited in time: 5% of the unpaid amount plus 1% for each full month, to a maximum of twelve months. So an old year does not grow without limit on the penalty side, while the interest side keeps running until the balance is cleared. Clearing the balance and arguing the penalty are two separate exercises, and in that order.
Can I just file the missing T1135 years and say nothing?
You can file them, but that is a decision rather than a default. Coming forward before the CRA raises the point is treated differently from filing after a letter arrives, and relief from a penalty is discretionary in either case, not automatic. What tends to matter is the record: when the property was acquired, when the obligation was first triggered, what the taxpayer was told at the time, and what was done once the position became clear. Assemble that before filing, because the explanation is much harder to build after the forms have gone in unaccompanied.
Does a second late T1135 cost more than the first?
Not simply because it is the second. On the income tax return the higher rates for the 2025 tax year, 10% of the unpaid amount plus 2% for each full month to a maximum of twenty months, apply only where the CRA both issued a demand to file and charged a late-filing penalty in any of the three preceding tax years. Repetition on its own does not trigger them, and the higher figures are not a doubling of the ordinary ones. Check the file for a demand letter before assuming the worse rates apply.
Which years do I actually have to go back and file?
Each year stands alone. A year is a filing year if the cost amount of the specified foreign property crossed the reporting threshold at any time during it, so a run of years can include some that need a form and some that do not. That means the first piece of work on a late file is not the forms, it is a cost schedule for each property and a year-by-year aggregate. Filing every year in the range to be safe is not harmless either: it puts returns on record for years where the position can be shown to be nil.
I have not filed for several years while living abroad — what are my options?
Both countries have routes back, and using one before they contact you is what preserves the relief. On the US side there are procedures aimed at taxpayers whose failure was not wilful, including one designed for people living outside the country, and separate procedures for late account reports and information returns alone. Canada has its voluntary disclosures programme and taxpayer relief for penalties and interest. Filing quietly and hoping is the one approach with no protection attached to it. See catch-up filing.
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.
