When you file your taxes on time, accurately, every year, you likely don’t suffer from the stress that tax compliance issues can bring. However, if you are one of the many Canadians that fall behind filing or find expenses or donations disallowed resulting in large penalties and tax debt, that stress can become overwhelming. Even worse is the stress that can come with the knowledge that you have filed incorrectly, even if Canada Revenue Agency (CRA) hasn’t caught you yet – you worry every day that they will. The constant fear of a CRA notional assessment, re-assessment, audit or CRA enforcement action is frightening and sits in the back of your mind no matter how much you try to ignore it. If you have found yourself in this position, you might be thinking ‘does tax amnesty in Canada really exist,’ and if so, how can you access it?
Tax amnesty does exist in Canada. This does not mean however that if you fail to file returns year after year and then seek tax amnesty that you will necessarily qualify. Tax amnesty in Canada is covered by the Federal Government’s Voluntary Disclosure Program (VDP).
What is VDP? The Voluntary Disclosure Program exists to give taxpayers the chance to file late returns or correct any incorrect filings, incorrectly claimed expenses, unreported income, etc. voluntarily. By admitting the error and working to correct it, the government may grant some relief from interest and penalties.
There are 4 conditions that you MUST meet in order to qualify:
- The tax year in question must be at least 1 year old.
- The voluntary disclosure must involve a penalty. This means that if you know that you will not incur a penalty after late filing, there is no ground to file (since it is unnecessary).
- The disclosure must be voluntary. This means that you cannot have been contacted by CRA with respect to the tax year in question.
- The disclosure must be complete. You have to ensure that your application contains ALL of the information, tax slips, claims, etc.
If you know that you have made a mistake on a return in the past, or if you have failed to file and are constantly worrying about it, it might be time to consider making an application for tax amnesty before it is too late and CRA notionally assesses you.
Accessing the VDP has to be done correctly the first time – there are no second chances. That is why it is always a smart choice to consult a tax professional and engage their services first. They can help steer you successfully through the VDP process, assess whether or not you qualify, and assist in filling out the application properly. As we said above – there is no opportunity to redo the filing. One strike and you are out!
For more information about tax amnesty through the Voluntary Disclosure Program, please contact Tax Solutions Canada today by calling 1-888-868-1400.