Missed Reporting US Income to CRA? The Voluntary Disclosures Program Can Help
Picture this: you bought a condo in Florida years ago and rent it out every winter. You file a US tax return for it, pay the IRS what's owed, and mentally file the whole thing under "handled." Or maybe it's an old brokerage account from a work stint in Chicago, a few shares in a US company sitting in your portfolio, or a bank account you left behind and forgot about.
Sound familiar? You're not alone and you may not be as "handled" as you think.
Canada taxes its residents on worldwide income. That means anything sitting on the US side of the border usually needs to show up on your Canadian return too, even if you already paid tax on it in the US. It's one of the most common and most fixable gaps we see. Almost no one does this on purpose. It's an assumption that trips people up, not intent.
The good news: the CRA's Voluntary Disclosures Program (VDP) exists specifically for this. Come forward before CRA raises the issue with you, and you can correct the record, pay only what you actually owe, and access meaningful penalty and interest relief relief that shrinks considerably once CRA gets there first.
Quick Gut Check: Does This Sound Like You?
Before we get into the mechanics, run through this list. If any of these apply, it's worth a closer look.
You own US real estate that's rented out or held as an investment
You have a US bank or brokerage account you've had for years and rarely think about
You've received US employment income, RSUs, or stock options and only filed a US return
Your Canadian corporation has US customers, a US subsidiary, or a single-member US LLC
Your company holds US investments or US real estate directly on its books
A quick note on that first one: a US vacation property used purely for personal enjoyment is treated differently than a rental more on that below. Any of the others ring a bell? Keep reading.
Why These Gaps Happen So Easily
Individuals
Situation | Where it usually goes wrong |
US rental property | Snowbirds file the US non-resident return (1040-NR) and assume that covers it — but the income also generally has to be reported in Canada and recalculated under Canadian tax rules, since exchange rates, CCA (depreciation), and deductible expenses can work differently. A foreign tax credit is typically available for qualifying US tax paid |
US bank or brokerage account | Feels too small to matter until it's added to other foreign holdings and crosses the reporting threshold |
US employment income, RSUs, stock options | Fully taxable in Canada too, with credit for US tax withheld easy to miss for cross-border commuters and remote workers |
Gifts or inheritances via US accounts | The gift itself may not be taxable, but the resulting foreign property often still needs to be reported |
Businesses
A Canadian corporation with US-source sales, a US subsidiary, or a single-member US LLC may trigger foreign affiliate reporting most owners have never heard of
US investments or US real estate held directly inside a Canadian corporation
Cross-border consulting or e-commerce revenue where US withholding tax was paid but never reconciled back to the T2
The Form Almost Nobody's Heard Of: T1135
This is where a lot of otherwise diligent taxpayers get tripped up.
If you're a Canadian resident individual, corporation, or trust and the total value of your "specified foreign property" was more than $100,000 CAD at any point in the year, you're required to file Form T1135, the Foreign Income Verification Statement.
Not every foreign asset counts, though. Personal-use property, certain registered plans, and a handful of other specifically excluded items sit outside the T1135 rules so a Florida condo used purely as a vacation home is generally excluded, while that same condo rented out to tenants generally isn't.
Three more details that surprise people every time:
It's cumulative. A US brokerage account and a US bank account can each sit under $100,000 on their own and still trigger the requirement once you add them together.
Cost, not market value. The threshold is based on what you paid, not what it's worth today but foreign shares held inside a Canadian brokerage account still count.
A snapshot in time. Even if you sold everything before year-end, crossing the threshold at any point during the year still triggers the requirement.
Registered accounts (RRSP, RRIF, TFSA, RESP, RDSP, FHSA) are excluded, and certain foreign retirement arrangements may be too but that determination depends on the specific plan and is worth confirming with a professional rather than assuming.
T1135 doesn't calculate any tax owing it's a pure disclosure form. But skipping it carries its own escalating penalties, entirely separate from tax on the underlying income.
Why This Isn't a "Someday" Problem
CRA and the IRS share a significant amount of account information, principally through the Canada-US FATCA intergovernmental agreement and the exchange-of-information provisions in the Canada-US tax treaty. There's a real chance a US bank, brokerage, or the IRS is already reporting your information to CRA. You just haven't heard about it yet.
Coming forward voluntarily and having CRA raise the issue with you first lead to very different outcomes. One puts you in the driver's seat on relief; the other doesn't.
What the Voluntary Disclosures Program Actually Offers
To be clear: VDP is not an amnesty. You still pay the tax you owe. But under the program's current rules (effective since October 1, 2025), the relief on offer is specific and substantial:
Unprompted applications: you come forward before CRA has flagged the specific issue qualify for 100% penalty relief and up to 75% interest relief
Prompted applications: CRA has already sent some form of communication about the issue, but hasn't opened an audit can still qualify for up to 100% penalty relief and 25% interest relief
Both tracks come with no referral for criminal prosecution and no gross-negligence penalties on the information disclosed
That last point matters more than people expect. Most of these situations are honest oversights, not intentional evasion but years of unreported foreign income is exactly the kind of thing that can carry prosecution risk if CRA finds it first. A valid Voluntary Disclosures Program application takes that risk off the table for whatever's disclosed.
Key Eligibility Considerations
CRA substantially redesigned the VDP in October 2025, so it's less a rigid checklist now and more a set of factors CRA weighs together:
Voluntary: you (or a related taxpayer) aren't already under audit or investigation on the disclosed issue by CRA or another regulator
Complete: everything relevant is disclosed, not just the parts that feel safest
Involves a penalty or interest exposure — there needs to be something at stake for VDP relief to apply
At least one year overdue: the filing generally has to relate to a year at least one year past its due date
Whether CRA has already contacted you: this determines unprompted vs. prompted status, which sets the level of relief, rather than disqualifying you outright
You don't get to pick your own track CRA decides after reviewing what you submit.
How Far Back You'll Need to Go
Type of issue | Lookback period |
Foreign-sourced income or property (most US issues) | 10 years |
Canadian-sourced income | 6 years |
GST/HST | 4 years |
A decade-old US rental property or brokerage account can mean preparing or amending up to ten years of returns and T1135s in a single application. It's a bigger job than a purely domestic correction, which is exactly why it pays to get the scope right from the start.
What the Process Actually Looks Like
Map the full picture. Every US account, property, and income source needs to be on the table an incomplete disclosure can sink the entire application.
Prepare the filings. The signed Form RC199, plus the amended or missing T1s, T2s, T1135s, and Form T1134 where a corporation has foreign affiliates.
Deal with the money. Payment of the estimated amount owing, or a formal request for a payment arrangement, goes in with the application.
Submit and let CRA review. They'll assess it against the eligibility criteria and confirm which track and which relief applies.
The Bottom Line
If you recognized yourself anywhere in that gut-check list at the top a US property, an old account, unreported cross-border income, a T1135 you're not sure was ever filed the best relief is generally available while you come forward on your own terms. Even if CRA has already sent a general compliance letter, VDP relief may still be available just on less favourable terms than if you'd gotten there first.
At BTS Financial Services, this is exactly the kind of cross-border cleanup we handle every day figuring out what should have been reported, preparing the missing years, and building a Voluntary Disclosures Program application that gives you the strongest possible case for penalty and interest relief.
If any part of this sounded a little too familiar, let's have a quiet conversation about it before it becomes a stressful one.
This article is general information, not tax advice for your specific situation. Every VDP case depends on its own facts talk to us before deciding how to proceed.
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