The CRA Voluntary Disclosures Program can be a second chance for taxpayers to correct their non-compliance, and get relief from prosecution, penalties, and interest.
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Voluntary Disclosures Program
Mistakes on taxes can happen to anyone. Under the Income Tax Act, an error or omission on your tax return (such as unreported income/assets) is subject to prosecution, penalties, and interest. However, the Income Tax Act also allows for taxpayers to come forward and correct their errors under the CRA’s Voluntary Disclosures Program (VDP).
Why File a Voluntary Disclosure?
The VDP allows taxpayers to correct their tax returns without punitive consequences. Subsection 220(3.1) of the Income Tax Act and subsection 281.1(2) of the Excise Tax Act allows the CRA to grant relief from prosecution, interest, and penalties. In order to be eligible for relief, the following four conditions must be satisfied:
- The disclosure must be voluntary: taxpayers must have wholly initiated the disclosure before enforcement action has been initiated. Enforcement action is broadly defined by the CRA to include audits, requests, demands or requirements for information, or direct contact by CRA employee in respect of non-compliance. A disclosure will not be considered voluntary where a taxpayer was aware of enforcement action set to be commenced by the CRA.
- The disclosure must be complete: the taxpayer’s disclosure must provide full and accurate facts and documentation for all tax years where they previously reported inaccurate or incomplete information. Accordingly, taxpayers cannot limit their disclosure to select errors or omissions or to specific tax years.
- Your failure to properly report income is subject to a penalty: a taxpayer’s disclosure must involve the application of a penalty or the potential application of a penalty.
- The information you will be disclosing is more than one year past due: a voluntary disclosure must include information that is at least one year past due. For example, an application involving only information from the 2016 taxation year will not be considered, however, an application involving information from 2014 through 2016 would be eligible.
- The application must include payment of the estimated taxes owing: a voluntary disclosure must be submitted with payment of the estimated amounts owing. If the taxpayer cannot make payment of the estimated tax owing at the time of the VDP application, a payment arrangement may be requested subject to approval from the CRA.
How Long Does the VDP Process Take?
The process of completing a voluntary disclosure, from beginning to end, can take up to a year. However, your protection under the program starts as soon as we file the initial application, which can be done within hours of our engagement.
How We Help
The challenge of making a voluntary disclosure lies in negotiating the terms of the disclosure with the CRA in order to avoid penalties, interest, and legal action. Moreover, the CRA only allows only one chance to make a disclosure. Therefore, it is crucial that the submissions are accurate and complete. Our team of ex-CRA staff, lawyers, and accountants brings extensive experience to help determine whether you are eligible for the VDP and ensure that your voluntary disclosure application is successful.
Let Us Solve Your Problems
Everyone makes mistakes. The CRA’s Voluntary Disclosures Program is an excellent way to correct errors on your tax returns. Our team of experts are committed to helping you navigate the voluntary disclosure process to find relief from prosecution, interest, and penalties. Let our experience work for you.
Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:
- 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
- 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
- 3| Offer a complete solution to your tax problems, including ex-CRA professionals, lawyers, and experienced accountants.
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