Can US penalties be removed without a reasonable cause letter?
Sometimes, yes. For a filer whose history is otherwise clean, an administrative waiver can remove certain penalties without any cause argument being made at all. Nothing has to have gone wrong and nothing has to be explained. That is a very different exercise from writing a statement about illness or missing records, and a much shorter one. The catch is that it depends on the history rather than on the story, so the answer is knowable before anything is drafted. Check it first. Writing a long argument for a penalty that could have been waived on the record alone is wasted work, and it puts facts on the file that did not need to be there.
Is first-time penalty abatement applied automatically?
No. It is requested. This surprises people, because the eligibility test turns on information the authority already holds, so it feels like something that ought to happen on its own. It does not. A filer who qualifies and never asks keeps the penalty. That makes the waiver easy to miss on a file otherwise going well: the returns go in, the assessment arrives with a penalty on it, and nobody asks the question because nothing looks wrong. Build the check into the point where the penalty first appears, not into a later review of the account.
Which penalties does first-time abatement actually cover?
Specified types only. It is not a general amnesty for anything the account shows, and a request treating it as one gets answered on the one penalty within scope while the rest stay where they are. So the first step on a file with several penalties is to separate them by type and work out which the waiver can reach. That often changes what the rest of the strategy has to do. Where two penalties sit on the same year and only one is in scope, the second needs its own route, and knowing that early stops the whole year being treated as solved.
Will one late year in the past disqualify me?
It may. The test looks at the filing and payment history for the preceding years, so an earlier lapse is exactly the sort of thing that closes the route. This is checkable rather than arguable, which is the useful part: the account history is a matter of record, so the answer comes from reading it rather than from making a case. Read it before you rely on the waiver. A file built on the assumption that the history is clean, discovered late to be otherwise, has usually lost time it could have spent on the argument it actually needed.
Should I ask for the waiver or write a reasonable cause statement?
Check the waiver first, then write the statement if you still need one. The order matters because the two cost very different amounts of work. The waiver is a question about the account history and is settled by looking. A cause argument needs a chronology, third-party documents and a judgement about what an ordinarily prudent person could have avoided, and it puts all of that on the record. Where the waiver does the job, none of that is necessary. Where it does not, you have lost nothing by checking, and you now know the longer argument is the route rather than a fallback.
Do I have to clear my balance before requesting the waiver?
The history requirement covers payment as well as filing, so an outstanding position on earlier years is the thing to look at before the request goes in rather than after it comes back. Deal with the earlier years on their own terms first. On the year in question, the request and the balance are separate matters, and treating them as one tends to delay both. If you are not sure what your own account history shows, that is the first piece of work rather than the last. Our fee for reviewing it is agreed in writing before we start, and the number is +1 (416) 619-0068.
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.
Is the sale of foreign property taxable where I live?
For a resident, yes — worldwide gains are taxable, and the gain is computed in your own currency, so the exchange rate at purchase and at sale changes the number even when the local-currency price did not move. The country where the property sits usually taxes it too, often with a withholding or clearance step before closing, and that tax becomes a credit. A principal residence relief may apply to a home abroad on the same terms as one at home. See principal residence and foreign property.
