March 29, 2022
By: Bruce Laregina
The CRA has updated the way it handles voluntary disclosures by taxpayers. For background, the CRA’s Voluntary Disclosures Program (“VDP”) allows taxpayers with unreported income, unfiled tax returns or undisclosed assets to come clean to the CRA in exchange for a removal of penalties and reduction of interest owing.
The CRA recently released a new internal manual (the “New Manual”) that its VDP officers follow when reviewing applications under the VDP. The New Manual provides insights into how the CRA will view VDP applications moving forward and hints at how taxpayers and their representatives can prepare applications to obtain a timely and successful result.
Priority Levels of VDP Applications
The New Manual now assigns a priority level, referred to as a “Workflow”, to each VDP application. The Workflow determines how quickly the CRA will review the application.
- Workflow one: The standard priority level. Files in Workflow one are reviewed on a first come first serve basis.
- Workflow two: The streamlined priority level for low complexity VDP applications that take less time to be reviewed than a typical VDP application.
- Workflow three: The high priority level for urgent files. This includes files:
- involving applicants that are likely to experience hardship if subjected to a long wait time;
- submitted by an executor on behalf of a deceased taxpayer; and
- involving applicants that may be prevented from accessing an emergency response benefit due to their outstanding application.
Based on this, taxpayers looking for a timely result should prepare their VDP applications to fall under Workflow two or three if possible.
Discretion of VDP Officers
The CRA’s previous manual focused heavily on strict standards and protocols for VDP officers to follow when reviewing applications. In contrast, the New Manual’s guidelines regularly suggest the VDP officer should use their own discretion when making decisions. This increased discretion may create more opportunities for taxpayers to successfully plead their case to VDP officers in their applications.
One Year Past Due
VDP applications must include information that relates to a taxation year that is at least one year past the due date for filing to be accepted by the CRA. The New Manual states that where a CRA deadline has been extended due to exceptional circumstances such as flooding, the CRA agent should use discretion to not penalize the applicant with respect to this criterion. We assume this would apply to any filing deadlines that were extended for COVID-19 or any future exceptional events.