The Canada Revenue Agency (CRA) has implemented the Voluntary Disclosure Program (VDP). The program allows Canadian taxpayers to voluntarily file a disclosure. The program allows both individuals and businesses the right to correct or amend their previously submitted taxes without risk of penalties or possible prosecution. The program encourages taxpayers to straighten out their tax matters. Taxpayers that withheld income on their taxes, claimed items and expenses that were not eligible to be claimed, withheld deductions, or even late filed tax returns can file a disclosure. More information about what can be filed on a disclosure is available on the “Canada Revenue Agency” web site.
The Voluntary Disclosures Program is designed to give Canadian taxpayers one final chance at getting their taxes corrected with the Canada Revenue Agency. If a taxpayer files a disclosure, they are expected to get that tax matter completely corrected before filing. Except in specific instances, taxpayers may only file a disclosure for a particular issue once. In case where something changes that is out of the taxpayer’s control, the CRA may allow the disclosure to be filed a second time. In order to file a disclosure, it must meet certain criteria. The disclosure must completely voluntary. If the CRA has started any actions or prosecution against the taxpayer, a volunteer disclosure cannot be filed. Besides being voluntary, the disclosure must reveal something at may cause a penalty. The information that is being disclosed must also be at least a year old. The final criteria is the disclosure must be complete. The taxpayer must provide all correct information in the disclosure and provide documentation that provides proof to the CRA that the disclosure is legitimate. Failure to provide proof can result in delays in processing the disclosure. To file a disclosure, a Form RC199 or a letter equivalent of the RC199 form is filed with the CRA. Up to date information about forms and requirements is available on the CRA web site, along with information about where to send it.. The effective date of the disclosure will be the date it is received by the CRA. Approximately 2 weeks after the CRA receive the forms; they will send a notification letter stating that the forms have been received. If the CRA requires additional information or documentation, they will contact the taxpayer by mail. Upon receiving the letter, the requested documentation must be provided within 30 days. If there are questions about what they are requesting, the taxpayer may call the CRA office and speak to a CRA officer who will answer any questions. Failure to provide the requested material will constitute rejection of the disclosure. After the CRA receives the documentation they need, they will send a letter to the taxpayer notifying them whether they accepted the disclosure or denied it. If the disclosure is rejected, taxpayers may contact the Director of the tax center that notified them of the denial in writing and request a second review. If the reason for the denial was due to failure to provide additional documentation within 30 days that the CRA requires, the disclosure will not get a second review. Taxpayers may elect to submit anonymous disclosures. All the same rules apply to these “no-name” disclosures. The only difference is that the name is omitted from the form. After an anonymous form has been filed, the taxpayer that filed the form has 90 days to provide documentation to the CRA to their identity. If proof of identity is not provided within the allotted time, the disclosure is rejected.
Taxpayers can submit a disclosure for any tax issue regardless of the age of the matter. The main stipulation is that the tax matter must greater than a year old. The Canada Revenue Agency hopes that this program encourages many taxpayers to come forward who, for whatever reason filed incorrect tax information either accidentally or intentionally before the CRA suspects a tax violation and puts them under investigation. This program is helped many taxpayers come out of “hiding” because they filed their taxes incorrectly and they were complete aware what they did and have lived in fear of being caught by the CRA. The program will allow these taxpayers to come forward without risk of prosecution and they are required only to pay the tax that is owed plus interest.