Help With the CRA’s Voluntary Disclosure Program in Canada
You don’t need a tax lawyer. The experts at Faris CPA get the same results for less than a lawyer’s fees.
Under-reported or failed to report income? Over-reported expenses? Made mistakes filling out forms? Did you claim an inflated charitable donation? Cheated by a dishonest tax preparer? Now is the time to make it right with the Canada Revenue Agency (CRA.) With the help of Faris CPA, you can ensure the best possible outcome and make your tax-related stress a thing of the past.
Need to Fix Past Tax Mistakes? We Can Help.
If you’ve failed to report income, missed tax filings, or made errors on past returns, the CRA’s Voluntary Disclosure Program (VDP) offers a chance to come forward and correct your tax situation—before the CRA contacts you. Our team, led by a Certified Professional Accountant has over 25 years of experience helping Canadians navigate the VDP process, minimize penalties, and regain peace of mind.
Why Choose Faris CPA?
25+ Years of Expertise – Extensive knowledge of the CRA’s Voluntary Disclosure Program and how to maximize its benefits.
Certified Professionals – A team led by a Certified Professional Accountant, Sam Faris, who will guide you through every step.
Personalized Support – We tailor your disclosure submission to protect your financial interests and reduce penalties.
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A Second Chance to Get Your Taxes Right
At Faris CPA, we’re more than just accountants—we’re your trusted advocates in correcting past tax mistakes before the CRA contacts you. Our expert team simplifies the Voluntary Disclosure Program process, protects your financial interests, and helps you achieve the best possible outcome.
Don’t wait until it’s too late. Contact us today for a confidential consultation and take control of your tax situation with confidence.
What is the Voluntary Disclosure Program (VDP) in Canada?
The Canada Revenue Agency (CRA) provides the Voluntary Disclosure Program to allow taxpayers to file unfiled or late tax returns and disclose previously unreported income, overstated deductions or credits, or other errors in their tax filings without facing severe penalties.
In other words, Canada’s VDP provides relief to taxpayers who voluntarily come forward and disclose their mistakes and unreported information. It also encourages compliance with Canadian tax laws by offering a “tax amnesty.”
What Clients Want to Know When They Contact Us About the VDP
It’s stressful having unfiled returns, unreported income, or mistakes on a previous return and worrying that the CRA will soon come knocking. When clients reach out to us for help, the first questions they usually ask about the Voluntary Disclosure Program are:
Will the CRA prosecute me?
Nobody can guarantee an outcome. However, we can tell you that the CRA decides on a case-by-case basis and that the risk of prosecution increases with the amount of unreported income and the severity of the mistakes made in a voluntary disclosure.
Can I disclose information beyond seven years in the past?
The CRA requires voluntary disclosures to go as far back as records exist. In other words, if the income of a Canadian taxpayer was unreported for 20 years, they expect the voluntary disclosure application to include 20 years of filings if the documentation is available.
Benefits of the CRA’s Voluntary Disclosure Program
Under Canada’s Voluntary Disclosure Program, taxpayers who willingly correct mistakes or gaps in their tax returns before the CRA learns of or approaches them about it may receive prosecution relief, as well as, in some instances (with the right help), penalty relief and partial interest relief from the costs they would otherwise have to pay.
However, you would still have to pay the taxes you owe, plus interest—in part or in full, depending on the outcome of your application.
Common scenarios the CRA’s Voluntary Disclosure Program addresses include:
- The filing of a tax return for a prior year is now past due.
- Income from all taxable sources inside and outside Canada was underreported or not reported on a previously submitted tax return.
- Unfiled or inaccurate reporting on Form T1135 – Foreign Income Verification Statement. If a taxpayer owns foreign assets exceeding CAD $100,000 at any time during the year, they must file Form T1135 annually. Non-compliance can trigger severe penalties, which the VDP can help reduce.
- Not reporting or improper reporting of offshore corporations and trusts on Form T1134 Information Return Relating to Controlled and Non-Controlled Foreign Affiliates. The CRA scrutinizes foreign corporations, trusts, and partnerships, especially where they are used to defer taxes.
- Unallowable expenses reported on a previous return.
- Source payments from employees that weren’t filed (for example, pension plan or employment insurance deductions.)
- Necessary forms which were not submitted. (for example, Form T1135, Foreign Income Verification Statement.).
- A business did not charge, collect, file or remit GST/HST.
- Reporting of ineligible GST/HST input tax credits, refunds, or reimbursements.
Since unfiled and misreported returns must be filed as quickly as possible, the CRA’s Voluntary Disclosure Program is often a helpful way to reduce or avoid automatic penalties.
Confidentiality in the CRA Voluntary Disclosure Process
The CRA is bound by Canadian laws like the Personal Information Protection and Electronic Documents Act to maintain confidentiality in the Voluntary Disclosure Program. The VDP must ensure the protection of taxpayers’ personal information and maintain confidentiality throughout the disclosure process. Some of the ways the CRA addresses confidentiality during a voluntary disclosure application include:
1. Secure handling of information
The CRA implements strict measures to protect the confidentiality of taxpayers’ information submitted through the Voluntary Disclosure Program.
2. Restricted access
Personal information related to VDP applications is stored in a dedicated, secure, and restricted repository on the CRA-certified shared drive.
3. Anonymous pre-disclosure discussions
Taxpayers can anonymously participate in preliminary discussions about their situation, allowing them to receive insights without revealing their identity.
4. Limited information sharing
While the CRA may share some information with provincial tax authorities, this is done using encrypted electronic communications and is limited to specific details such as name and account number.
5. Protection from prosecution
If the CRA accepts a voluntary disclosure application, the taxpayer can avoid being referred for criminal prosecution regarding the disclosure, further safeguarding their confidentiality.
6. Secure submission methods
Taxpayers can submit their voluntary disclosure applications through secure online portals such as My Account, My Business Account, or Represent a Client.
The CRA must respect the sensitive nature of voluntary disclosures and implement these measures, and more, to ensure taxpayers can come forward to correct past errors or omissions with confidence in the program’s confidentiality.
Eligibility for CRA Voluntary Disclosure Programs
Eligibility for the VDP is assessed on a case-by-case basis, but there are minimum criteria for eligibility. To be considered for acceptance to the Voluntary Disclosure Program:
- The CRA must not have taken any enforcement action concerning the unfiled and unpaid taxes, such as commencing an audit or issuing arbitrary assessments.
- The taxpayer must fully disclose all tax details for all tax years for which the submissions were incorrect.
- The taxpayer owes taxes and faces penalties.
- Returns must be at least one year past due.
The CRA recommends that you complete and submit Form RC199, Voluntary Disclosure Program (VDP) Application, to apply to the VDP.
Taxpayers also have the option to apply for the VDP by sending a letter with the same information requested on the form. The letter must include:
- The information requested is in sections 1 and 2 of Form RC199.
- If applicable to your situation, The information requested in sections 3 to 6 of Form RC199, if applicable.
- A statement that you and your representative (if applicable) have read and agreed to the Taxpayer Declaration in Section 7 of Form RC199.
You should always consult with voluntary disclosure experts for help before applying to the VDP to confirm that it’s your best option, increase the likelihood of your acceptance into the program, and ensure the most successful outcome if your application is accepted.
Formal Agreements with the CRA in the Voluntary Disclosure Program
- Initiate the disclosure process
- Provide necessary information about the taxpayer and the disclosure
- Outline the details of the errors or omissions being disclosed
- Formalize the terms of the disclosure
- Confirm the taxpayer’s understanding and acceptance of the VDP conditions
- Document the taxpayer’s commitment to correcting their tax affairs
These formal agreements are crucial in the voluntary disclosure process. They establish the terms of the disclosure and ensure that both the taxpayer and the CRA clearly understand the information disclosed and the program’s conditions.
The CRA’s Voluntary Disclosure Process
At a high level, the VDP consists of two programs, one for income tax and one for GST/HST.
Voluntary Disclosure for GST/HST Misfilings
- The Wash Program is used for transactions in which the supplier did not remit the proper GST/HST amount on a taxable supply. If the tax was applied correctly, the registrant recipient would have been entitled to claim a full input tax credit (ITC).
- The General Program can provide relief for applications based on non-compliance due to error.
- The Limited Program is reserved for instances of intentional non-compliance.
Applicants may qualify for 100% penalty relief under the Wash and General programs. Under the Limited Program, registrants can avoid a gross negligence penalty even if warranted. Reach out to us for more information and help with the CRA’s Voluntary Disclosure Program for GST/HST issues.
The Voluntary Disclosure Program for Income Tax Reporting Errors in Canada
There are two tracks in the CRA’s Voluntary Disclosure Program for income tax returns:
- The General Program allows taxpayers to voluntarily fix reporting errors and missed filings. Acceptance into this program is more desirable as it allows taxpayers to avoid penalty and prosecution and may provide interest relief. Professional help maximizes your chances of acceptance into this VDP stream.
- The Limited Program is used for taxpayers who have intentionally not paid their full tax obligations. While it allows taxpayers to avoid criminal prosecution and gross negligence fines, they may still be charged with other applicable penalties and are not eligible for interest relief.
The CRA considers several factors when deciding whether to allow a taxpayer to disclose under the VDP’s General Program or if they must do so in the Limited Program, including:
- If the applicant made efforts to avoid detection.
- The amount of taxes owed.
- The sophistication of the taxpayer.
Even if the CRA finds that one or more factors may indicate intentional tax avoidance, a taxpayer should not be automatically disqualified from the VDP’s General Program. This is another example of why a CPA with years of experience helping taxpayers with their voluntary disclosures is vital during a VDP application, as they will protect your rights during the process.
Disputing a CRA VDP Decision
If you are unhappy with the CRA’s decision regarding your acceptance into the Voluntary Disclosure Program, the stream you were assigned to, or the lack of relief applied to your disclosure, you can ask for an administrative review. If your application is denied after the second administrative review, you can apply to the Federal Court for a judicial review. However, the cards are stacked against you in this process, which is why you need help submitting a solid application from the start.
Why You Should Consult Faris CPA Before Applying to the CRA’s Voluntary Disclosure Program
Even if you qualify for eligibility, acceptance into the VDP is not guaranteed.
As voluntary disclosure experts, the team at Faris CPA knows what circumstances can disqualify a disclosure as not being “voluntary,” what items must be reported (i.e., how to ensure that the disclosure is “complete”), whether your circumstances leave you open to the possibility of a penalty, and the best ways to reduce interest and penalties in your circumstances.
Avoid sleepless nights and uncertainty. Connect with a CPA expert in the voluntary disclosure process to help maximize your chances of acceptance and minimize your tax, interest, and penalty costs.
Sam Faris (Founder of Faris CPA)
Voluntary Disclosure Program Case Studies: Real Clients Benefitting from Faris CPA’s VDP Specialists
VDP Case Study #1: A Former Canadian Resident Had Claimed Several Years Worth of Tax Credits Incorrectly
A client approached us as she had recently moved to Australia and needed help determining when her Canadian tax obligations ended. We reviewed all the facts and her financial information to determine when she would no longer be considered a Canadian tax resident and discovered that the tax credits she had been claiming for the last several years were invalid.
We prepared the required amended tax returns and submitted them under the VDP. The CRA accepted our application, saving our client considerable tax, interest, and penalty costs.
VDP Case Study #2: A Corporate Owner Saved from Prosecution
A client hired us to correct his corporate books and submit amended corporate tax returns. When working on his file, we noticed a significant amount of personal funds were withdrawn and not properly accounted for in the client’s individual tax returns.
We approached him regarding this issue and advised him to file amended tax returns immediately under the VDP before the CRA contacted him. He agreed, and we prepared the required documents and submitted them under the Voluntary Disclosures Program.
The CRA accepted our submission, which saved him from prosecution and granted him partial interest and penalty relief. This resulted in a significant amount of savings for our client.
VDP Case Study #3: A Widow with Significant Unreported Offshore Assets
Laura, a Toronto resident, approached Faris CPA to correct her and her deceased husband’s prior years’ fillings. She needed to amend more than 10 years of income tax returns to reflect millions of dollars in investments and income in their Swiss bank accounts that were not reported to the CRA.
Faris CPA’s advice was to disclose all transactions immediately via the Voluntary Disclosure Program. We then disclosed all unreported offshore income and the unfilled T1135 offshore assets forms. We were able to convince the CRA Appeals Officer to limit the disclosure to only 10 years.
Our submissions were accepted with no questions asked, and, as a result, our client was not charged any penalties. Not only that, but we got her interest relief on the outstanding taxes owed.
