Before you waste time and money paying a tax solution company to walk you through the Canada Revenue Agency’s (CRA) Voluntary Disclosure Program (VDP), you might want to read this post and learn the facts they don’t want you to know.
In order to “qualify” for the Voluntary Disclosure Program, there are some important facts which must be taken into consideration first;
- The disclosure must be voluntary, and by voluntary, the CRA means that the business or taxpayer must not be aware of or have knowledge of an audit, investigation or other enforcement action set to be conducted by the CRA, or initiated by the CRA, with respect to the information being disclosed.
- The disclosure must be complete, meaning that all information must be disclosed and all the outstanding years must be filed in this application.
- The disclosure must involve the application of a penalty, such as, but not limited to, Late Filing Penalties (LFP), Late Remitting Penalties (LRP), and Failure to make installments, Gross Negligence Penalties.
- The disclosure must relate to information that is at least one year past due.
If you’ve fallen behind in filing, or failed to disclose or declare income – possibly from overseas / offshore investments / tax shelters / income properties, and the CRA has not previously tried to contact you for the returns, then the VDP might be for you.
The VDP allows taxpayers who make a valid disclosure under the Income Tax Act (ITA) to pay taxes owing plus interest, but avoid penalty and / or prosecution.
To make a valid voluntary disclosure, with the CRA means you would pay only the taxes you owe plus interest, and you may avoid penalties and potential prosecution on the information accepted under the program.
You can file a disclosure to correct inaccurate or incomplete information or to provide information you may have omitted in your previous dealings with the CRA.
To submit a disclosure, fill out and sign Form RC199, Voluntary Disclosures Program (VDP) Taxpayer Agreement, or write a letter giving the same information as on the form.
You can submit your Form RC199 or your equivalent letter to the CRA directly, using the Submit documents online service now available through My Account, My Business Account and Represent a Client.
Once you have logged in to one of these portals, click on “Submit documents” on the left hand navigation menu, select “I do not have a case or reference number,” and then select “Make a voluntary disclosure.” From this point you will be prompted to upload your letter or Form RC199 as well as to provide a short file description.
At the end of the process, you will be given a reference number that you can use if you need to add more documents.
You can also send your disclosure by mail to one of the CRA’s tax centres.
The following are circumstances under which VDP relief may be granted:
- you did not fulfill your obligations under the applicable act;
- you did not report taxable income you received;
- you claimed ineligible expenses on your tax return;
- you did not remit your employees’ source deductions;
- you did not report an amount of GST/HST (which may include undisclosed liabilities or improperly claimed refunds or rebates or unpaid tax or net tax from a previous reporting period);
- you did not file information returns; or
- you did not report foreign-sourced income that is taxable in Canada.
Disclosures relating to any of the following are not accepted under the VDP:
- bankruptcy returns;
- income tax returns with no taxes owing or with refunds expected;
- advance pricing arrangements;
- rollover provisions; and
- post-assessment requests for penalty and interest relief.
You can make an anonymous disclosure, referred to as a “no-name” disclosure. You will have 90 calendar days – beginning on the date the CRA notifies you that there are 90 days to provide the identity of the taxpayer involved, not 90-days from the date of initial disclosure.
The CRA will close the disclosure file without further contact if the identity is not provided before the 90th day.
Additionally, payments should begin as soon as the disclosure is made in order to reduce the amount of interest which is accruing on the file.
Any “taxpayer” can use the VDP, because the CRA considers a taxpayer to be an individual, an employer, a corporation, a partnership, a trust, a goods and services tax/harmonized sales tax (GST/HST) registrant/claimant, and a registered exporter of softwood lumber products. You can also have an authorized representative make a disclosure for you.
There is no limit on how far back the VDP will request or review information. A disclosure must be complete and provide all the relevant information to allow the VDP officer to appropriately review and decide whether statute-barred years should be opened for reassessment. Income will be assessed in the year it is earned. If you have not filed for several years (that is, you are a non‑filer), you are expected to update all your tax years.
You are expected to keep your affairs up to date after using the VDP. You cannot make a second submission for the same issue for which you originally received the benefits of the program, however the CRA will consider a second disclosure in situations where the circumstances were beyond your control.
If this is the case, you will be required to give the CRA your name and tell them that you previously made a disclosure. If you do not reveal that you previously made a disclosure and this is uncovered by the CRA, your disclosure may be considered invalid and denied.
Additional information from the CRA
Form RC199, Voluntary Disclosures Program (VDP) Taxpayer Agreement
Form RC59, Business Consent
Form T1013, Authorizing or Cancelling a Representative
Information Circular IC00-1R4, Voluntary Disclosures Program
Making a Voluntary Disclosure on your Ontario Corporate Tax
Beyond the VDP is the opportunity to apply for Taxpayer Relief for full or partial relief of penalties and or interest, if applicable.
Save yourself the hassle of being subjected to someone else’s agenda. Know your rights, and your options. Know the truth.
For further information or to discuss the VDP and Taxpayer Relief provisions, send an email to us at firstname.lastname@example.org