Issue #120 – Voluntary Disclosures

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Tax Question:

What is the Voluntary Disclosure Program and how can it help me?

Facts:

Tax filings can be complicated and occasionally you may miss a filing or make an incomplete or inaccurate filing or overlook information or returns that should have been filed. The Voluntary Disclosure Program (VDP) is administered by Canada Revenue Agency (CRA) to encourage taxpayers to comply with Canada’s tax laws without incurring penalties for missed, incomplete and inaccurate filings.

Discussion:

By making a valid disclosure under the VDP, you would pay only the taxes and interest owed and you may avoid any penalties or potential prosecution on the information disclosed.

There are many types of information that you can disclose to CRA such as:

Unreported personal or business income
Unreported source deductions
Late filed income tax returns
Late filed information returns
Expenses you were not entitled to claim

To be accepted as a valid disclosure under the VDP, your submission must meet all of the following four conditions:

The disclosure must be voluntary (you must make the disclosure before CRA noticed and commenced action against you with respect to the information you are disclosing)
The information disclosed may involve a penalty
The disclosure must include information that is generally more than one year overdue
The disclosure must be complete. It must include all appropriate information to support the disclosure

You cannot make a disclosure more than once on the same issue. For example, if you have missed a T1135 Foreign Income Verification Statement in a previous year and made a valid disclosure for this missed filing under the VDP, you cannot use the VDP at a later date to file another missed or incomplete T1135. Therefore, you want to use this program carefully and ensure that you disclose all incomplete or late filings on the same issue as one submission under the VDP and then be very diligent and thorough with your filings around this issue in subsequent years.

Recommendation:

If you are considering filing under the Voluntary Disclosure Program, please contact us.

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About the Author

Dawn is one of our original staff members. She has over 15 years of experience in public practice. Her focus is on preparing corporate financial statements and tax returns for corporate groups and preparing SR&ED claims.