In Toronto, there are many individuals and corporations who have involuntarily made tax filings mistakes in previous years yet, are concerned with the result of rectifying these errors. The Voluntary Disclosure Program (VDP) is a program provided by the Canada Revenue Agency (CRA) for taxpayers who believe they have made previous tax errors or omissions. The VDP encourages voluntary compliance with Canada’s tax laws by offering an opportunity to correct these mistakes while providing relief from partial interest, penalties, and prosecution.
There are two streams:
- One stream deals with disclosure on income tax and source deductions
- The other deals with the harmonized sales tax, excise tax, goods and services tax, excise duty, air traveller’s safety charge and the softwood lumber products freight charge.
The taxpayer must ensure that they have made all reasonable efforts to estimate all unreported earnings and provide all the relevant information for the type of disclosure they want to submit. At SDG Accountant, our tax accountants can assist you in determining which stream is appropriate for your disclosure and that all the necessary information is included.
Since March 1st of 2018, a new VDP program has been implemented for the income tax stream. This new program ensures that there is a just treatment for individuals and corporations who would like to correct their previous mistakes but not extend that opportunity to those who deliberately failed to comply with their tax duties. There are two tracks (general and limited) that result in a very different outcome based on the CRA’s distinction.
The general program offers relief on 50% of the interest and relief on penalties that apply on amounts owing but the limited program restricts the level of relief that taxpayers will receive if determined to be intentionally avoiding their tax obligations. There are certain factors that will determine if an application is categorized under the general or limited track. Our firm can determine eligibility based on the CRA’s conditions.
Meeting the conditions for a valid application will increase your chance of qualifying for relief. Another benefit of using the VDP is the reinstatement of benefits such as the Canada Child Benefit, GST/HST credits and RRSP carryforwards that were not previously available due to failing to file previous tax returns. These conditions include:
- The application is voluntary and is not the result of a notified offence.
- The VDP is complete.
- The application must involve a penalty that would normally be imposed due to an error or omission.
- The application must include a tax return at least one year past due as it is not an extension to the current filing year.
- The application must include a payment of the estimated tax owing.
Under the VDP program, you will be able to submit pertinent information to the CRA without disclosing your name. This anonymous disclosure allows the taxpayer to establish a substantial indication of the CRA’s response and the repercussions of proceeding with the program.
A no-names voluntary disclosure is a powerful tool that taxpayers should use however, there is a 90-day limitation. Due to this time restriction, when the CRA becomes aware of a taxpayer’s hidden involvement in tax non-compliance, that taxpayer’s participation in the VDP will be restricted.
Although the VDP is a very beneficial resource, it is important to disclose your tax issues with a tax accountant as to ensure that your omitted income does qualify for the disclosure program or if there are any other relevant tax treaties and provisions that can lead to a more favourable conclusion. At SDG Accountant we have the appropriate expertise to help clients with any US and Canadian tax advice.
SDG Accountant can ensure you have thoroughly and accurately complied with all the conditions that must be met to submit an authentic disclosure. We have offices in Toronto that can provide all the steps to submit a successful VDP, including tax owing estimates, unfiled income tax returns, back-taxes, unfiled HST, sales tax returns, any unreported income and unreported foreign assets on the T1135 form.
If you are interested in determining your eligibility for the Voluntary Disclosure Program, please contact our Toronto office directly by email: [email protected] or by calling our office (416)-755-3000.