If you’re sitting with the knowledge that you incorrectly made claims on your income tax filing, or know that you haven’t filed but should have, this knowledge is probably causing you some stress. In cases such as this, the government provides access to certain avenues to correct inaccuracies or amend previous filings. The Voluntary Disclosures Program is one such program – a second chance to change a tax return you previously filed or to file a return that you should have filed. Doing so may provide you with relief from penalties and possible prosecution.
Before you get started on an application, you need to make sure that you are eligible. According to the CRA, you may be eligible for relief of penalties for correcting your taxes if you did not:
- fulfill your tax obligations
- report taxable income you received
- claim the right expenses on your tax return
- remit your employees’ payroll deductions
- report an amount of GST/HST, which may include undisclosed liabilities or improperly claimed refunds or rebates, unpaid tax or net tax from a previous reporting period
- file information returns
- report foreign income that is taxable in Canada
If you believe that any of these factors apply to you, the Voluntary Disclosures Program may be an important option to explore.
To meet the requirements for VDP, your application must meet all of the following conditions:
- a penalty would apply
- it is voluntary, which means you make it before you are aware of the CRA taking any compliance action against you
- the information is at least one year overdue
- it includes all the relevant information
If you meet all of these conditions, the CRA will look over your file and determine whether or not to grant relief.
Just be aware that even one minor mistake can cause your application to be denied. Since the Panama Papers leak in 2016, the CRA has become far stricter when it looks at VDP applications. Because it is voluntary, meaning you’ve never been contacted about the issue at hand, filing a faulty application will result in the CRA finding out about the problem and could thus result in collective/legal action being taken.
To best protect yourself, consider working with a tax professional to ensure that you are meeting all of the required qualifications and providing all relevant information to avoid setting yourself up for disaster.
At Tax Solutions Canada we are well-versed in the various nuances of the Voluntary Disclosures Program and know how to best achieve the most favourable results. Don’t wait for the CRA to contact you (or assume that they will never find out). Call us today: 1-888-868-1400.