A voluntary disclosure must include the following four aspects:
- It must be, as the name suggests, voluntary. This means that you must initiate the process before you become aware of any compliance action that the CRA may be taking against you.
- The information provided must be at least one year overdue.
- The information provided must be complete.
- There must be a penalty involved, meaning that the information provided will result in taxes or penalties likely being assessed. The voluntary disclosure program cannot be used to get yourself a refund.
If your disclosure satisfies these terms and is deemed appropriate by the CRA, the agency may waive all applicable penalties. You can also avoid potential criminal prosecution by filing voluntary disclose. The CRA may also agree to grant partial interest relief and reduce the interest owed to them. However, how the CRA will treat your case will depend on the particular circumstances of the disclosure filing.
The request for relief must be made within 10 years from the period in which the taxpayer is looking for relief.
A person can make an anonymous disclosure. By making an anonymous disclosure, you do not have to identify yourself but you must prove how you meet the conditions above and supply the required supporting information. You will have 90 days from when the CRA makes a request for information to identify the taxpayer involved.
Circumstances where Voluntary Disclosure May Help
The Voluntary Disclosures Program (VDP) can include situations such as:
- Failing to report taxable income
- Claiming ineligible expenses
- Not reporting foreign-sourced income that is taxable in Canada
- Not reporting an amount of GST/HST
- Cases where an employer does not remit employees’ source deductions
- Situations where a person has not fulfilled their obligations under the applicable act
- Not filing information returns
However, the VDP does not apply in cases such as bankruptcy returns, elections, advance pricing arrangements, rollover provisions, post-assessment requests and returns with no taxes owing or an expected refund.
After you submit your disclosure, the CRA may contact you by letter to ask for more information. The information must be provided within the timeline requested or the CRA voluntary disclosure request may be denied.
Once the CRA has reviewed your application, you will be informed in writing as to whether or not the agency has accepted your disclosure. If you disagree with this assessment, you may request a second review of your file. However, a second review will not be granted if you have not provided the CRA with the information requested in a timely manner.
In order to determine if the Voluntary Disclosure Program could be beneficial for you, please do not hesitate to contact us.
Speak with a qualified professional at Farber Tax Solutions by calling 1-888-868-1400.