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Voluntary Disclosures Program
Did you forget to claim some income on past tax returns? Or maybe you discovered a mistake on a past tax or GST/HST return? To correct past mistakes, you might want to apply for the Voluntary Disclosures Program (VDP). The VDP grants relief to taxpayers & registrants who voluntarily report errors or omissions in their taxes. Through the VDP, you can apply to fix inaccurate or incomplete information or disclose unreported information. If you apply, you must apply for all taxation years with errors or omissions. If approved, penalty relief can be granted for any year within the 10 years prior to the year you apply. In cases where books & records no longer exist, you must make their best effort to estimate the income for those years.
What VDP Programs Are There?
The Voluntary Disclosures Program has two program tracks, the General Program & the Limited Program. When your application is submitted, the Canada Revenue Agency (CRA) reviews it & assigns it to one of the programs.
If you are assessed under the General Program, you are not charged late penalties nor faced with criminal charges. In addition, you may receive up to 50% relief on interest owed.
If accepted under the Limited Program, you are not charged with gross negligence penalties nor faced with criminal charges. However, you are charged penalties & interest as applicable.
When to apply for the VDP
With such a wide range of reasons for filing a VDA, the CRA looks at each application. Once they review the application & the taxpayer information, the CRA assigns the file to a program.
The list below shows examples of applications considered under the General Program:
– Did not file a tax return for a prior year,
– Provided Incomplete information on a return,
– Did not report or under-reported taxable income
– Claimed ineligible expenses on a tax return,
– Did not remit employee source deductions (e.g., employment insurance deductions),
– Claimed ineligible GST tax credits, refunds, or rebates
– Did not charge, collect, or report GST/HST, or
– Failed to report foreign income that is taxable in Canada.
The list below shows examples of applications considered under the Limited Program:
– Taxpayer avoided paying taxes by using offshore accounts etc.,
– The dollar amounts involved,
– Multiple years of non-compliance,
– The sophisticated taxpayer,
– The VDP made following CRA correspondence about compliance.
Conditions for a Valid Application
Now that you know what you can get relief for, you must meet the application requirements. For your VDP application to be accepted, it must meet all five requirements listed below:
– Be voluntary;
– Be complete;
– Involve the application or potential application of a penalty;
– Include information that is at least one year past due; &
– Include payment of the estimated tax owing.
Your VDP application must include all taxation years that were inaccurate. In addition. the request for VDP must involve the application or possible application of a penalty by the CRA.
There are a lot of additional things to know when considering applying for VDP. It can be beneficial in the right circumstances & is best discussed with a tax professional before applying. If you think you may need to apply for the VDP Contact us & discuss your situation with one of our partners.
Photo by Markus Winkler on Unsplash