Canada Revenue Agency (CRA) Voluntary Disclosure Program (VDP) Changes March 1st, 2018.

The Canada Revenue Agency (CRA) have announced that effective March 1, 2018, changes will be made to the Voluntary Disclosures Program to narrow its eligibility criteria.

What is the Voluntary Disclosure Program (VDP)?

The VDP provides Canadians a second chance to change a tax return which has been previously filed with the Canada Revenue Agency (CRA), OR to file a return(s) which you should have filed with the CRA.

Your application under the VDP – if approved – allows you to file or amend a return without the CRA prosecuting you, or assessing penalties.

Who Can Apply?

Taxpayers!

Taxpayers can be;
• Individuals
• Employers
• Corporations
• Partnerships
• Trusts
• GST/HST registrant / claimants
• Registered exporter of softwood lumber products

You can apply, or you can have an authorized representative – like an accountant, or tax professional like inTAXicating, submit the application on your behalf.

How Many Times Can You Apply?

The CRA would prefer you use VDP once and stay up-to-date on filings from that point onwards, however should circumstances warrant it, you can apply again.

Conditions of a Valid Application

To qualify for relief, the application must:
• Be voluntary – You come to the CRA before the CRA gets to you.
• Be complete – You cannot file for one year, for example, you have to file everything and disclose everything.
• Penalty: Involve the application or potential application of a penalty and, for GST/HST applications, the application or potential application of a penalty or interest
• Time: Include information that is at least one year past due for income tax applications and, for GST/HST applications, at least one reporting period past due; and
• Include payment of the estimated tax owing.

The Process

Submit an application to the CRA, and if the CRA approves it, the returns in question are filed or amended and there is no penalties or fear of prosecution (unless you are engaged in criminal activities).

The CRA then expects you to pay the balance owing – or make arrangements to pay – because while there is no penalties, there is still interest accruing on the account.

* The above information applies until February 28, 2018.

The CRA will update their VDP guidelines as of March 1, 2018, so in order to be considered under the existing VDP, the CRA must receive your application, including your name, on or before February 28, 2018.

What Changes March 1st, 2018? 

On March 1, 2018, when the new VDP comes into effect, it narrows the eligibility criteria to access the Program and imposes additional conditions on applicants, making it more difficult for those who intentionally avoid their tax obligations to benefit from the VDP.

Income Tax Disclosures

With the changes to the program, two tracks will be created for income tax disclosures:

1. Limited Program

The Limited Program provides limited relief for applications that disclose non-compliance where the facts suggest that there is an element of intentional conduct on the part of the taxpayer or a closely related party.

Under the Limited Program, taxpayers will not be referred for criminal prosecution with respect to the disclosure and will not be charged gross negligence penalties, however, they will be charged other penalties and interest as applicable.

2. General Program

Under the General Program, taxpayers will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed. The CRA will provide partial interest relief for years preceding the three most recent years of returns required to be filed.

GST/HST, excise tax, excise duty, softwood lumber products export charge and air travellers security charge disclosures

For GST/HST, excise tax, excise duty, softwood lumber products export charge and air travellers security charge disclosures, three categories will be created:

1. Wash Transactions

Wash transactions are generally transactions where a supplier has failed to charge and collect GST/HST from a registrant entitled to a full input tax credit. This category provides relief only for applications involving GST/HST “wash transactions” that are eligible for a reduction of penalty and interest under the policy set out in GST/HST Memorandum 16.3.1, Reduction of Penalty and Interest in Wash Transaction Situations.

Registrants will not be charged penalties nor interest and will not be referred for criminal prosecution related to the information being disclosed.

A registrant must now disclose information on any non-compliance during the four years before the application is filed.

2. Limited Program

This category provides limited relief for applications that disclose non-compliance where the facts suggest that there is an element of intentional conduct on the part of the registrant or a closely related party.

Under the Limited Program, registrants will not be referred for criminal prosecution with respect to the disclosure and will not be charged a gross negligence penalty, however, they will be charged other penalties and interest as applicable.

3. General Program

All of cases fall under the General Program where registrants will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed.

The CRA will provide partial interest relief and a registrant must now disclose information on any non-compliance during the four years before the application is filed.

How to Determine if a Disclosure Falls under the General or Limited Program?

For both income tax and GST/HST disclosures, the determination of whether an application should be processed under the General or Limited Program will be made on a case-by-case basis and in doing so, the CRA may consider a number of factors, including but not limited to:
• The dollar amounts involved;
• The number of years of non-compliance; and
• The sophistication of the taxpayer/registrant.

Other Significant Changes to the VDP

1. Payment

Payment of estimated taxes owing: Payment of the estimated taxes owing will be required as a condition to qualify for the program (When a taxpayer does not have the ability to make payment at the time of filing the VDP application, they may request to be considered for a payment arrangement.)

2. Anonymous Disclosures Eliminated

The “no-names” disclosure method has been eliminated and replaced by a new pre-disclosure discussion service.

The process for taxpayers and authorized representatives to make disclosures on a no-names basis has been eliminated. Under the new “pre-disclosure discussion” service, taxpayers or their authorized representatives can have a conversation with a CRA official on an anonymous basis, but that discussion does not constitute acceptance into the VDP.

3. Large Corporations

Generally, applications by corporations with gross revenue in excess of $250 million in at least two of their last five taxation years, and any related entities, will be considered under the Limited Program.

4. Transfer-Pricing

Due to the complexity of transfer pricing issues, applications will now be referred to a specialized Transfer Pricing Review Committee, which will review the applications instead of the VDP.

For efficiency, taxpayers may send their applications directly to this committee.

5. Review by Specialists

Applications involving complex issues or large dollar amounts will be reviewed for completeness by the relevant specialist from the program area prior to being accepted.

6. Disclosure of Advisors

The name of the advisor who assisted with the non-compliance should now be included in the application.

7. Cancellation of Previous Relief

The new VDP regulations provide the CRA with the ability to cancel relief which was previous provided to a taxpayer if it is subsequently discovered that a taxpayer’s application was not complete due to a misrepresentation.

8. Mandatory Waiver of Rights of Objection and Appeal

Under the Limited Program, participants will have to sign a waiver of their right to object and appeal in relation to the specific issue disclosed.

 

If you need assistance with a Voluntary Disclosure – at any time – we can help!

Email: info@intaxicating.ca

On the phone: 416.833.1581 (If you are outside of Toronto, and would like to speak to us live, please email us, and we will gladly call you at your convenience)

On our website: http://www.intaxicating.ca (Portal coming soon – currently under construction).

Advertisements

Key Deductions and Tax Credits for Persons Older Than 65-Years of Age

With the 2014 Tax Filing season rapidly approaching, I think it is important to keep track of key deductions and credits that Canadians older than 65-years-old should be thinking about when they file their Canadian tax returns this year and all years going forward.

The Canada Revenue Agency set up their own webpage dedicated just to this very topic: http://www.cra-arc.gc.ca/seniors/ which I recommend bookmarking, but I have summarized their points below for ease of access.

Common credits which may be claimed by seniors

  • Age amount
  • Pension income amount
  • Disability amount (for themselves)
  • Amounts transferred from a spouse or common-law partner
  • Medical expenses

Age amount

You can claim this amount if you were 65 years of age or older on December 31, 2013, and your net income (line 236 of your return) is less than $80,256. If your net income was:

It is important to remember to enter your date of birth in the “Information about you” area on page 1 of your tax return.

Remember to claim the corresponding provincial or territorial non-refundable tax credit to which you are entitled, on line 5808 of your provincial or territorial Form 428.

Tip: You may be able to transfer all or part of your age amount to your spouse or common-law partner or to claim all or part of his or her age amount. See line 326 – Amounts transferred from your spouse or common-law partner, for more information.

Pension income amount

You may be able to claim up to $2,000 if you reported eligible pension, superannuation, or annuity payments on line 115, line 116, and/or line 129 of your return.

Eligible pension income does not include the following income amounts:

  • any foreign source pension income that is tax-free in Canada because of a tax treaty that entitles you to claim a deduction at line 256;
  • income from a United States individual retirement account (IRA); or
  • amounts from a RRIF included on line 115 and transferred to an RRSP, another RRIF or an annuity.

Canada Pension Plan (CPP) income does not count as eligible income here.

Pension income splitting

If you qualify to claim the pension income amount, discussed above, then you are often able to report up to one-half of that pension income on your spouse or common law partner’s tax return, which will save you tax as a couple if your spouse is in a lower tax bracket.

Amounts transferred from your spouse or common-law partner

If your spouse or common-law partner does not need to claim some or all of certain non-refundable tax credits to reduce his or her federal tax to zero, you may be able to transfer those unused amounts to your return.

Split CPP income

If you and your spouse are at least 60 years of age, and one or both of you receive CPP benefits, each spouse may be able to apply to split their benefits with the other (i.e., report half on each other’s tax returns), which can save tax if one of you is in a lower tax bracket.

CPP contributions

If you are 60 to 70 years of age and employed or self-employed, you have to make CPP or Quebec Pension Plan (QPP) contributions, even if you’re receiving CPP or QPP benefits.

You can claim a tax credit for these contributions. However, if you’re at least 65 but under 70 years of age, you can elect to stop making contributions (use Form CPT30, the applicable part of Schedule 8 to your tax return, or Form RC381, whichever applies), but don’t just stop making the contributions without that election!

Medical expenses (for self, spouse or common-law partner, and your dependent children born in 1996 or later)

On line 330 of your personal tax return you can claim the total eligible medical expenses you or your spouse or common-law partner paid for:

  • yourself;
  • your spouse or common-law partner; and
  • your or your spouse’s or common-law partner’s children born in 1996 or later.

Medical expenses for other dependents must be claimed on line 331.

Tip:

You may be eligible to claim a variety of medical expenses, perhaps even previously unclaimed amounts, as long as the expenses were incurred in any 12-month period that ended in 2013. The list of eligible expenses has continued to expand slowly over the past few years.

It is wise tax-strategy to claim medical expenses on the lower-income spouse’s return to maximize your tax relief.

Disability amount (for self)

You can claim the disability amount of $7,697 on line 316 once you are eligible for the disability tax credit (DTC).

Tip:

If you were eligible for the DTC for previous years but did not claim the DTC when you filed your return, you can request adjustments for up to 10 years under the CRA’s Taxpayer Relief Provisions. To claim the disability amount for prior years, you will need to file Form T1-ADJ, T1 Adjustment Request, for each year you need to amend.

If you or anyone else paid for attendant care, or for care in an establishment, special rules may apply. For more information, see Attendant care or care in an establishment.

If you have a severe and prolonged physical or mental impairment, you may be eligible to claim $7,697 if a qualified practitioner certifies, on Form T2201 – Disability Tax Credit Certificate, that you meet certain conditions.

Public transit amount

You can claim the cost of monthly (or longer duration) public transit passes for travel on public transit within Canada for 2014. The cost of electronic payment cards can also be claimed when conditions are met.

Work force credits

If you’re still working, even part time, you may be eligible to claim the Canada employment amount (maximum $1,117) and the Working income tax benefit (see Schedule 6 of your return).

Registered plans

You’re entitled to make contributions to a registered retirement savings plan (RRSP) until the end of the year in which you turn 71-years-old.  Don’t forget to claim a deduction if you have made a contribution for 2014.

And if you’re eligible for the disability tax credit it is possible to make contributions to a registered disability savings plan (RDSP) to shelter income on those contributions from tax.

OAS clawbacks

Some seniors must pay back all or a portion of their Old Age Security (OAS) benefits if their income exceeds $70,954 (for 2013). If you’re in this boat, examine the types of income you’re earning to see if you can change the type of income earned to reduce the impact of these clawbacks going forward.

The Canada Revenue Agency (CRA) also administers the Ontario Trillium Benefit (OTB) which is the combined payment of the Ontario energy and property tax credit, the Northern Ontario energy credit, and the Ontario sales tax credit. The annual OTB entitlement is usually divided by 12 and the payments issued monthly. Your 2015 OTB payments, which are based on your 2014 income tax and benefit return, will be issued on the 10th of each month, starting on in July 2015.

Exceptions:

Starting with your 2014 income tax and benefit return, you can elect to receive your 2015 OTB in one payment at the end of the benefit year. If your annual 2015 OTB entitlement is over $360 and you make this election, you will get it in one payment in June 2016 instead of receiving monthly payments from July 2015 to June 2016.

If your 2014 OTB annual entitlement is $360 or less, it will be issued in one lump-sum payment in the first payment month (usually July).

 

These items often changes and some situations may be applicable to you, while other’s may not.  Please speak to your accountant or tax professional to be sure they apply.  If you claim a credit you are not entitled to, the CRA will disallow the credit and charge you interest from the date the returns were due.

 

#inTAXicating