Voluntary Disclosures Program Ontario
It is always best to file taxes on time and to ensure the CRA receives complete and accurate information. However, this is not always the case.
For any number of reasons, taxpayers may put off an unpleasant task, resulting in them being several years behind on their tax filing. Other taxpayers might have filed returns on time but had their income understated or their expenses inflated to lower their tax liability. The thought of reopening a filing or having to amend a back tax return with the Canada Revenue Agency (CRA) may cause some taxpayers concern.
To assist in that process, the CRA has instituted a program to encourage Canadians who have engaged in such conduct to come forward and effectively come clean. That program is the CRA’s Voluntary Disclosures Program (VDP). Read on to find out how it works and what is involved.
What Is a Voluntary Disclosures Program?
Voluntary Disclosures Program (VDP) grants tax relief to taxpayers and registrants who voluntarily come forward to fix errors or omissions in their tax filings in order to prevent them from being contacted by the Canada Revenue Agency (CRA).
You will be required to pay any taxes you owe, plus interest that results from any corrections you make. However, if CRA accepts your application, you will receive prosecution relief, and in some cases penalty relief and partial interest relief that you had otherwise had to pay.
Most Canadians pay their taxes in full and on time, so it is crucial that relief provided under the VDP be fair and not punished individuals or corporations looking for ways to avoid paying their fair share of taxes.
To be fair to all taxpayers, the CRA treats those who mistakenly fail to pay their taxes more generously than those who intentionally fail to pay their taxes. So when you know that you will owe taxes and penalties will be assessed, the Voluntary Disclosures Program may be worthwhile to take advantage of.
If you find yourself in one of these situations, you may benefit from this program and its benefits:
- A tax return for a previous year was not filed and is now late
- Income was not reported or under-reported on a tax return that is already filed
- Expenses were claimed on a tax return that was not eligible
- Employee source deductions were not submitted (for example, pension plan or employment insurance deductions)
- Required information returns were not filed (for example, Form T1135, Foreign Income Verification Statement)
- Income from foreign sources that is taxable in Canada was not reported on a tax return that is already filed
- GST/HST wasn’t charged, collected, and/or reported for any reporting period
- Ineligible GST/HST input tax credits, refunds, or rebates were claimed
- Incomplete information was provided on return for a reporting period
How Do You Qualify For The Voluntary Disclosures Program?
Most taxpayers and registrants can make an application for the Voluntary Disclosures Program. Taxpayers include individuals, employers, corporations, partnerships, and/or trusts.
As mentioned above, the CRA will only grant relief from penalties, criminal prosecution and will charge reduced interest. The taxpayer will still have to pay any tax and interest owing. In other words, the program is meant to promote compliance with Canada’s tax laws, and is not intended as a way of avoiding tax obligations.
Under the Voluntary Disclosures Program, there are four conditions for a valid disclosure:
- The disclosure must be voluntary. It means that the taxpayer should be unaware that any audit, investigation, or enforcement action took place in respect of the information being disclosed.
- The taxpayer must provide complete and accurate documentation/information for the years or periods where there was previously inaccurate or unreported information.
- There should be penalties for the inaccurate or unreported information. If penalties aren’t applied, it doesn’t make it valid.
- The information provided must be one year old. The VDP is open to all taxpayers, whether they are individuals, corporations, trusts, employers, etc.
It’s important to note that the CRA Voluntary Disclosures Program only covers the last ten years. This means that you must submit your Voluntary Disclosure form no earlier than ten years before the year in question. This ten-year period is considered the Limitation Period on Discretion for Relief of Penalties and Interest.
The CRA has no capacity to provide relief beyond the ten-year period. If your tax liabilities go beyond the ten-year period, your situation is best addressed by a Canadian tax lawyer. The cause should be apparent since you may still be prosecuted for tax evasion, even if you filed your return more than ten years ago.
The CRA Voluntary Disclosures Program Process
In order to complete the Voluntary Disclosure process with CRA, you have to tell the agency information that it already does not know. That’s why it’s important to not only fill out the application correctly but also to use the program correctly.
After you submit the voluntary disclosure form, the CRA may contact you by letter to request more information. If you fail to provide the necessary information within the requested time frame, the request might be denied.
As soon as the CRA reviews your application, you will be notified in writing whether or not the agency has accepted your disclosure and what relief has been granted. If you disagree with the assessment, you may request a second review of your file. However, the CRA will not grant you another review if you have failed to provide the information requested.
PRO TIP:
“Apart from filing your tax returns in a timely manner, You should examine your records to determine if you have provided insufficient or inaccurate information to the CRA. Otherwise, the CRA could potentially start to investigate your finances even if it finds that you are not hiding anything.”
Consult With Our Ontario Team of Income Tax Experts
When you know that you will owe taxes and penalties will be assessed, the Voluntary Disclosures Program may be worthwhile to take advantage of. In order to ensure that this process is handled smoothly, professionally, and accurately, do not hesitate to seek professional and legal help from our team of income tax experts at Rotfleisch & Samulovitch Professional Corporation.
A perfect mix of experience and ability makes income tax issues a subject of ease. Our team from Ontario will review your situation, determine if the Voluntary Disclosures Program is the best option for you, and assist you throughout the entire process. Contact us at 416-367-4222 / 416 367 8649 or leave a message at david@taxpage.com.
| Voluntary Disclosures Program (VDP) | The Canada Revenue Agency’s Voluntary Disclosures Program (VDP) allows taxpayers to correct inaccurate or incomplete information or disclose unreported information. If a taxpayer’s disclosure meets the CRA’s conditions for the VDP, the taxpayer is not assessed penalties or criminally prosecuted with respect to the disclosure and the CRA charges reduced interest. |
| RC199 Voluntary Disclosure Form | The CRA Voluntary Disclosure process begins by completing the RC199 Voluntary Disclosures Program (VDP) Application. If you complete your application and it is accepted by the Canada Revenue Agency, you will have to pay the taxes owing. You may also have to pay interest, either in part or in full, depending on whether you are accepted into the general or the limited program. |
| T1135 Foreign Voluntary Disclosure Form | Taxpayers are required to disclose if they own any foreign property valued more than $100,000 in Canadian currency. This disclosure is done by completing the T1135 Foreign Income Verification Statement. Failing to complete this form can have very significant consequences. The $100,000 threshold is based on the cost amount, not the fair market value of the property. Also, the term “property” does not just refer to real estate. It also includes bank accounts, debt securities and shares in foreign corporations, and other tangible and intangible properties located outside Canada. |
When you know that you will owe taxes and penalties will be assessed, the Voluntary Disclosures Program may be worthwhile to take advantage of. Do not hesitate to seek professional and legal help from our Ontario team of income tax experts at Rotfleisch & Samulovitch PC.
Voluntary Disclosures Program in Ontario FAQs
What is the offshore voluntary disclosure program?
The Offshore Voluntary Disclosure Program (OVDP) is a voluntary disclosure program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets.
What form is used to submit voluntary disclosure applications?
The CRA Voluntary Disclosure process begins by completing the RC199 Voluntary Disclosures Program (VDP) Application. As with any document, especially one that goes to the CRA, this form must be completed with care.
How long is the application period for voluntary disclosure applications?
Voluntary Disclosure will only apply to tax years 10 years or earlier. This means that you must apply for Voluntary Disclosure 10 years or earlier from the tax year in question. The taxpayer must request relief within 10 years from the period in which relief is sought. The ten-year period is referred to as the Limitation Period on Discretionary Relief of Penalties and Interest.