CRA Voluntary Disclosure Program (VDP)
If you are curious about how the voluntary disclosure program (VDP) works, and if and when you are able to use it, our experienced CPAs and tax professionals at Faris CPA can help you to present a full and accurate picture to the CRA. The offshore voluntary disclosure program can be an important component of protecting your interests and this can assist you with avoiding penalties or other potential criminal aspects.
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Get Your Tax Problem Solved
It can be a big mistake to not come forward with changes you need to make on your tax returns. You do not want the CRA to do this on your behalf when you could be facing serious challenges like criminal charges and penalties. In order to leverage this program, however, you need to come forward with your voluntary disclosure information as soon as possible so that you can show your efforts to rectify this situation. Doing this on your own is overwhelming; because of the importance of the details, make sure you have time set aside to speak with a tax professional about your options.
What Is the Voluntary Disclosure Program?
The voluntary disclosure program is the Canadian taxpayers’ method of correcting mistakes. This gives you a second chance to amend a tax return that you previously filed or to file the return that has not yet been filed but should have. In the event that your voluntary disclosure application is accepted by the CRA, you will have to pay any taxes owed in addition to any interest either in part or in full. Using a voluntary disclosure program, however, protects you from penalties that you would otherwise have to pay and gives you relief from prosecution. The CRA does not approve applications for relief from taxpayers who intentionally avoided their tax applications in the same way that they would provide relief to someone who wishes to correct an unintentional error. Furthermore, if the CRA has already received details about a taxpayers’ potential involvement in non-tax compliance, then the CRA will restrict participation in this program. There are two primary streams in the voluntary disclosure program: the income tax stream and the GST-HST stream.
Benefits of The Voluntary Disclosure Program
In addition to avoiding penalties that would otherwise be assessed on the amount of taxes owed, taxpayers get relief from prosecution so long as their voluntary disclosure application is accepted. The voluntary disclosure program can be a taxpayer’s saving grace by taking fines, penalties, and prosecution off the table for mistakes that might have been made when filing the taxes.
The Conditions for Being Able to Use The VDP
Five conditions must be met in order for the CRA to accept a voluntary disclosure application. The application must be complete, be voluntary, include information about a minimum of one reporting period past due, involve the application or possible application or interest of penalties and include payment of the estimated tax owed.
The General Program Versus the Limited Program
It is important to remember that you can also anonymously disclose information to the CRA. The CRA, however, is under no obligation to commit to a binding outcome. Applications accepted under the limited program are not subject to criminal prosecution and are exempted to more serious penalties which would otherwise apply in situations involving gross negligence on the part of the taxpayer. Interest on outstanding tax balances, however, must be paid and penalties will be levied. Those taxpayers whose conduct is not aligned with the limited program will be considered under the general program.
The CRA considers numerous factors and elements to decide whether or not the limited or general program applies. These elements include the sophistication of the taxpayer, the dollar amounts involved, the number of years of non-compliance, and whether efforts were made to avoid detection through the use of offshore vehicles or other means. Under the general program, no criminal prosecutions will take place and no penalties will be charged. The CRA will give partial interest relief most specifically for the years related to three months recent periods of non-compliance. This relief is usually equal to about 50% of the interest owed. Taxpayers can only become eligible through the VDP by making an application to the program.
Correcting Business Taxes
The voluntary disclosure program can also be used to correct business deductions. The VDP additionally has an offshore program that allows taxpayers to amend foreign business income. If this applies to you, consider a consultation with your tax professional.
What Are the Consequences If You Are Audited by The CRA?
It is far better to come forward under the voluntary disclosure program. The CRA will closely examine the books and records of a taxpayer to determine whether or not that person has met their tax obligations.
At the end of an audit a final letter will be sent to you and either no adjustments will be made, or an adjustment will be made in more taxes owed with the balance due or an adjustment will be made with less taxes owed and you will be entitled to a refund. If this involves potential criminal behavior, you could also be facing additional fines and charges.
What is the voluntary disclosure program?
The Voluntary Disclosure Program is a tax amnesty offered by CRA. The CRA’s Voluntary Disclosure Program promotes compliance by urging you to come forward voluntarily and fix omissions in your previous dealings with the CRA. Taxpayers who submit a valid voluntary disclosure pay the principle taxes or charges, without the penalties or criminal prosecution that they would otherwise face. In some cases, the CRA may also waive interest charges.
How can you help me correct my tax issues?
I can review your filed tax returns and advise if there are mistakes. If there are mistakes, I can recommend the approach.
Is income tax voluntary in Canada?
The income tax system is based on voluntary compliance because the government knows tax laws are unconstitutional and cannot be enforced. There is no question that voluntary compliance is the cornerstone of Canada’s self-assessment taxation system.
How do I submit a voluntary disclosure?
Contact your tax professional today to gather the information to file voluntary disclosure. The paperwork must be submitted accurately and completely; using a tax professional to help you ensures a great chance of success.
Can the CRA go back ten years?
In most cases, the CRA will go back three years to review information on your taxes to correct things. The agency can go back farther than 3 years if they believe that fraud has occurred and that a taxpayer has misrepresented themselves through carelessness or willfully.