If you fail to report income from a business or investment, there is still time to get things in order. The Canada Revenue Agency (CRA) has created the Voluntary Disclosure Program (VDP) to help taxpayers come forward and correct their taxes before the auditors find them.
If you want to take advantage of this program, you must know what it means to come forward sooner rather than later. Also, you must understand how you can take advantage of the opportunities. Here are the three things you must know about the CRA voluntary disclosure program.
What Is It
The CRA voluntary disclosure program is designed for individuals who fail to report income, assets, or taxes in another jurisdiction. In such a case, you may be able to participate in this program to correct your tax affairs. You may also be eligible if you didn’t report income from selling stocks, mutual funds, or other investments. The CRA voluntary disclosure program enables taxpayers who have not fulfilled their tax obligations to come forward and rectify their situation.
That doesn’t mean that the CRA won’t catch you someday—you can only participate in the VDP once. After that, the CRA may audit you at any time, which means that if you disclose again, you will face even harsher penalties than usual.
When To File
Before filing for the program, you must understand that it’s only applicable for the last ten years of the tax disputes. Therefore, if your tax year in question is in June 2019, the relief is appropriate for the 2009 and subsequent tax years.
This is the Limitation Period on Discretion for the Relief of Penalties and Interest. The CRA can no longer provide tax relief for the past years beyond this period. If you have tax issues that are more than a decade old, it’s best to discuss them with your tax lawyers. If the audit finds out that you’ve failed to file tax returns, the CRA may charge you with tax evasion.
CRA Voluntary Disclosure Program Tracks
The CRA voluntary disclosure program has two tracks. The relief type you could get depends on which track the CRA places your case on.
The CRA will include your case under the VDP General Program if you made unintentional errors on your returns and wish to correct them. The agency will grant partial interest relief for the years before the last three years of your returns. This means you won’t have to pay penalties and are free from criminal prosecution.
The VDP Limited Program is for instances when the agency thinks tax avoidance was intentional. The CRA won’t charge you gross negligence penalties and prosecute you. However, you may still receive other charges and applicable interest fees.
The CRA assigns the track your case belongs to, which often depends on years of non-compliance and the taxpayer/registrant experience.
Applying for the CRA voluntary disclosure program is straightforward. You can do it yourself. However, only do so if you believe your tax delinquency is simple. Complex cases require proper expert guidance.