- Avoiding penalties and prosecution
- Minimizing the interest charges
- How to safely bring yourself in line with the tax rules
First things first – not filing your tax returns or failing to declare income is against the law. Bluntly, it is criminal. Both will result in penalties and interest and may even result in CRA prosecuting you for tax evasion. If you check CRA’s website, each year thousands of Canadians are prosecuted for tax evasion. What is interesting is that they are not criminally charged because they owe huge amounts of money – they are charged and receive a criminal record (to go along with the fines and jail time) to make examples of them.
What can you do? One option (if you qualify and complete the process 100% correctly) available to some is the Voluntary Disclosure Program. Under the Voluntary Disclosure Program you can file late returns or declare income that previously was not declared. If accepted, CRA will not prosecute you or charge you penalties.
There is a catch – you have to qualify.
- The tax year in question must be at least 1 year old and it must involve a penalty.
- Disclosure must be voluntary –if CRA has been sending you notices or has contacted you about any tax compliance problem, disclosure will not be considered voluntary. It is a good idea to have a professional review your case before filing a Voluntary Disclosure Program application – this way you can gain insight into whether you are likely to qualify or not.
- Disclosure must be complete – This means that no information can be omitted whatsoever. For example, if there is some other non-disclosure not included that comes up later you will have a problem. Your Voluntary Disclosure Program application is your one-off chance to come clean about everything.
The standard process: the application is made, shortly thereafter a Voluntary Disclosure Program officer is assigned to the account, the past due returns are filed and then you are advised if you were approved or not. Herein lies the problem – you only find out if you are approved after you apply. However, you have now shown CRA you owe them money and if you do not qualify under the Voluntary Disclosure Program, you are going to be dealing with some heavy collection enforcement.
Some people find a false sense of security with ‘no name’ Voluntary Disclosure Program applications but unfortunately with those applications you have to disclose your sex, postal code and a couple of other small things. This doesn’t make it too difficult for CRA to figure out who you are. This is why the best approach is to first find out if you qualify. If you don’t, there are other avenues you can use to combat the penalties associated with a tax debt. Choosing the right option for you will depend on your personal circumstances.
For more information about the CRA Voluntary Disclosure Program please visit www.taxsolutionscanada.com or call 1-888-868-1400.