If you formed a U.S. LLC and your Canadian-side filings stopped at the IRS, you may be missing the one CRA form that has caught the most Canadian-resident LLC owners we work with: T1135, the Foreign Income Verification Statement. This post explains when it applies to your LLC, what the threshold actually means, and how the penalties stack if you skip it.
What is T1135?
T1135 is a Canadian disclosure form, not a tax return. The CRA uses it to track Canadian residents who hold "specified foreign property" with a total cost above CAD $100,000 at any point during the year.
In plain language: if you, a Canadian resident, hold ownership in foreign assets that cross the threshold, you tell the CRA what those assets are, where they are, and what they earned. T1135 itself does not create new tax. It creates an information trail that lets the CRA verify your other filings.
Does your U.S. LLC count as specified foreign property?
Yes, in almost every case for Canadian-resident owners.
Specified foreign property includes:
- An interest in a non-resident entity (your U.S. LLC qualifies)
- Funds held in a non-resident bank account (your Mercury, Relay, or Wise Business account)
- Tangible property situated outside Canada
- Shares of a non-resident corporation
For a Canadian-owned single-member LLC, both the LLC interest itself and the U.S. business bank balance count toward the threshold. Two separate buckets, one combined T1135 reporting.
The $100K CAD threshold, how it really works
Three things often surprise Canadian LLC owners:
It is the cost amount, not the market value. The CRA wants the cost basis. If you funded your LLC with CAD $40,000 and the LLC built up a Mercury balance of CAD $80,000 from revenue, your cost basis in the LLC interest is the original CAD $40,000, plus retained earnings logic. The Mercury balance counts at its actual amount.
It is the maximum during the year, not the year-end balance. If your account peaked at CAD $120,000 in July and dropped to CAD $40,000 by December, you are still over the threshold and must file.
It is across all specified foreign property combined, not per asset. A small LLC plus a small US bank account plus some US dividend stocks can collectively cross the threshold even if each asset alone is small.
What you report (and what you don't)
T1135 has two reporting tiers based on year-end totals:
| Cost amount | Form version | What you disclose |
|---|---|---|
| CAD $100,000-249,999 | Simplified | Country, type of property, top three countries |
| CAD $250,000+ | Detailed | Every asset, country, max cost during year, year-end cost, income generated, gain/loss |
For most early-stage Canadian-owned LLCs, the simplified version applies. Once your LLC equity plus business bank balance exceeds CAD $250,000, the detailed version kicks in and the disclosure becomes much more granular.
The penalty math, why people get hit retroactively
T1135 penalties are not designed to scare you on day one. They stack.
- $25 per day, up to a maximum of $2,500, for late filing
- $500 per month, up to $12,000, after CRA demands the form
- $1,000 per month, up to $24,000, if CRA issues a formal demand and you still do not file
- 5% gross negligence penalty on unreported foreign property if the omission was willful
- The clock can run for multiple prior tax years simultaneously
The pattern we see: someone forms an LLC, ignores T1135 for three years, eventually gets flagged through CRS information sharing or a CRA review, and then receives a stacked penalty across all three years at once. The base T1135 obligation is small. The retroactive stack is what hurts.
Coordinating T1135 with your IRS Form 5472
These two forms get confused often, so it helps to map them out.
| Form | Filed with | Purpose | Triggers |
|---|---|---|---|
| IRS Form 5472 (with pro-forma 1120) | U.S. IRS | Reports money movement between you and your LLC | Any transaction, no dollar threshold |
| CRA T1135 | CRA | Reports your foreign property holdings | Specified foreign property over CAD $100K |
Form 5472 is about transactions. T1135 is about holdings. Form 5472 has a $25,000 minimum penalty per occurrence. T1135 has stacking daily and monthly penalties. Filing one does not satisfy the other. Most Canadian-owned LLCs need both annually.
Common mistakes Canadians make
- Assuming the LLC equity does not count because it is "just your own business" (it counts as an interest in a non-resident entity)
- Reporting only the bank account balance and forgetting the LLC interest
- Using year-end balance instead of the year's maximum cost amount
- Skipping T1135 in years the LLC was inactive (the holding still exists, the threshold still applies)
- Treating the IRS Form 5472 as a substitute for T1135 (different governments, different forms, both required)
Where to go from here
If you formed your LLC in the last year and have not filed T1135, you can usually still file before the deadline (April 30 for individuals, June 15 for self-employed) without late penalties.
If you missed prior years, the Voluntary Disclosures Program (VDP) may reduce or eliminate penalties for past omissions, but it requires the disclosure to be voluntary, complete, and made before CRA contacts you. Consult a Canadian cross-border tax professional before you file.