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CRA wants you to report your sale
Apr 16, 2018
Canada Revenue Agency is getting tough on people who don’t report the sale of a home, even with zero tax owing. Because the rules of reporting are relatively recent they may go easy on applying fines at the moment. If you don’t report the sale of a principal residence on your tax return you could be fined as much as $8000. The rules for reporting the sale of a house has changed with a potentially harsh cost for not complying. The PRE or personal residence exemption means you don’t pay tax on capital gains when you sell a home designated as a principal residence. You or a spouse, common-law partner or a child must have lived in the house at some point during the year. Prior to 2016 it was unnecessary to report the sale of a principal residence. At this time the government announced a series of steps to slow the housing market down and close house-related loopholes.
Some people had used the previous lack of scrutiny to their advantage with investors flipping homes and others who owned a cottage and home without declaring which was a principal residence. CRA says that if you forget to report a sale of a principal residence, you’ll need to amend your tax return for that year as soon as possible. Late reporting could possibly evoke a penalty equal to the lesser of $800 or $100 for each complete month you’re late in reporting.
Mark Goodfield, an accountant at BDO says a new requirement for 2017 is to fill out a T2091 form, which carries a “Designation of a Property as a Principal Residence by an Individual” label from CRA. There is also a requirement to fill out Schedule 3 on the basic tax form, where you report the sale of various types of financial assets.. Previously the use of T2091 was for the sale of property that wasn’t the principal residence for the entire time they owned it. All you have to do is provide the address of the home, the year you bought the property and the proceeds of the sale. Mr. Goodfield describes the penalty for not complying as fairly stiff. It should also be noted that another incentive to disclose the sale of a principal residence is that a late filing could raise a red flag and possibly initiate an audit. Report the sale of your principal residence promptly to avoid both cost and hassle.