When navigating the VDP, a reputable CPA is your trusted guide. We precisely review your records and submissions, ensuring you meet the published conditions for relief and providing you with the confidence that you’re on the right track.
As the name suggests, the VDP is a proactive and legal avenue that empowers Canadian taxpayers and registrants to correct errors or omissions in past tax filings. By doing so, you can typically avoid financial penalties and interest that would otherwise accrue due to non-compliance.
The first step is to determine if you qualify for the VDP. A CPA will carefully evaluate your financial records and tax history to confirm your eligibility and identify whether the VDP is the best way to address your compliance issues. They will also consider any recent changes in CRA tax legislation that may impact your case.
Once your eligibility has been confirmed, the next step is to prepare and submit a comprehensive voluntary disclosure. This is a crucial step, as it includes a statement that outlines the nature of the errors or omissions and explains why you did not file them in the past. Providing as much detail as possible is not just recommended; it’s essential, as your case will be evaluated on a case-by-case basis.
Once your application is submitted, the CRA will work with you to resolve your compliance issues and establish an appropriate settlement. This could include paying back taxes, reducing or waiving penalties and interest, and resolving disputed tax issues. In addition, the CRA may request relevant documents, books of accounts and records to evaluate your case.
While small businesses must fully comply with tax laws, mistakes or omissions sometimes occur. When this happens, the CRA Voluntary Disclosures program provides an opportunity to rectify these errors and avoid the consequences of criminal prosecution. However, working with experienced professionals is crucial to ensure that any information you provide to the CRA is accurate and in good faith, as this can significantly impact the outcome.
The first step is to have an informal, non-binding discussion with a CRA official. These discussions are confidential and can be conducted without revealing your identity.
However, they do not guarantee that you will be accepted into the VDP or receive any relief in terms of penalties or interest.
During this meeting, you will be asked to complete a list of past errors or omissions. While it is necessary to disclose as much information as possible to be assessed for eligibility, it is equally important not to provide any unnecessary information.
Giving the CRA more information than it needs to access will only increase your risk of not being accepted into the program. It may even result in you not getting the maximum relief available.
The next step is to file the RC199 VDP application with the CRA. This form must be completed with great care, as the details you provide can impact your ability to qualify for relief. It is also important to avoid providing the CRA with unnecessary information, as this could be used against you in the future.
As the name suggests, this process is voluntary. This means that it must be initiated before the CRA becomes aware of your compliance issues, and it cannot be used as a tool to get you a refund.
Once the CRA receives your application, it will review it to determine your eligibility for relief. The CRA will notify you in writing of its decision and what, if any, relief is granted.
If you qualify for relief, the CRA will stop any enforcement action against you. Furthermore, you can proceed with your business. This is a significant benefit, as failure to file your taxes correctly and on time can lead to substantial penalties, including fines, fingerprinting, and a criminal record.
The CRA did not need to know the taxpayer’s identity to apply for the old version of the program. Disclosures could be initiated on a so-called no-names basis, and extensions to complete the application were routinely granted.
However, the new version of the VDP takes a different approach. Applicants must now provide their identity and pay the tax owing as part of the disclosure to be eligible for relief.
Depending on the level of culpability, an applicant may qualify for one of two program tracks: a General track and a Limited track. The new track is more restrictive than the previous one. In that it does not provide relief from criminal prosecution or case penalties and provides only partial relief for interest.
The key to ensuring that a CRA voluntary disclosure is successful; to work with a team of experienced professionals. It is essential to ensure that the CRA is provided with all the information required by the agency in a timely fashion to avoid any potential delays. In addition, recent court decisions do not bode well for taxpayers seeking protection from reassessments of earlier returns by using new information revealed through the voluntary disclosure process.
