No one likes doing their taxes every year or even paying them, but it is something that must be done. Cheating on taxes in any country can result in heavy penalties, fines and sometimes even incarceration. Within the United States, Americans only have an Offshore Voluntary Disclosure program, but no options right now to avoid penalties for being honest about a discrepancy within their in-country taxes. Canadian residents, however, have the option to use the Voluntary Disclosures Program (VDP) to disclose any information that was not reported in prior years to the Canada Revenue Agency (CRA). Any disclosures that are honest have the potential to save the individual from paying a penalty or even from being incarcerated, but do not guarantee it. Also, keep in mind, that interest is applied to any past due amounts owed. Luckily for taxpayers, the Canada Revenue Agency actually takes anonymous disclosures from people. The CRA will discuss situations hypothetically. This gives the individual an idea of how their use of the VDP would affect them. The taxpayer who makes an anonymous disclosure must disclose their identity in 90 calendar days from the effective date of disclosure. This is in order to complete the taxpayer’s disclosure. Individuals are only protected from prosecution for those 90 days. This also includes being protected from the application of penalties in those 90 days. However if, at the end of the 90-day period, the identity of the individual is not released, the voluntary disclosure case is then closed. The CRA is not allowed to extend the 90 days to find the identity of the person and there is no longer any contact involved with the CRA about the situation.
These admissions on non-payments are accepted for any income tax or goods and services tax/harmonized sales tax - also known as: “GST/HST”. What does this mean? This means that any individual who has any income or expenses or has not filed information returns- that have not been disclosed to the CRA, have a chance to do so only in writing. This must be done voluntarily, all forms complete, applying for a penalty (if applicable) and include revenues that are at least one year or more past due. Voluntary here means, that the Canada Revenue Agency has never tried to make any previous contacts by any means about the issues or years in question. If the CRA has made a contact attempt before about these issues, then you are not eligible for the Voluntary Disclosures Program.
If the Voluntary Disclosures Programs issues a decision that argues the belief of the taxpayer, a second review can be requested. The individual must contact the director of the tax center who made the original decision. If there is still an issue, the individual has the option to take their case to the judicial system for further exploration. The best choice to make before even attempting to use the Voluntary Disclosures Program is to contact a professional tax representative for help. A tax representative knows exactly what to look for to make sure an individual is protected under the VDP. If an individual attempts to make a disclosure on his or her own without any help from a professional, there is a high risk of making mistake. The results in these mistakes include but are not limited to alerting the CRA in issues without the VDP’s protection, subjecting individuals to 10% penalties for being late and/or for repeatedly failing to report income and even a monthly 2% charge (up to 20 months) for each month the debt to the CRA is late.
The last thing anyone wants to do is incriminate themselves by trying to do the right thing the wrong way! Taxes can be tricky. Mistakes can be made without ever knowing it. This is why it is extremely important to never attempt to process taxes without assistance from a professional. In the long run, tax representatives can save someone thousands of dollars and even from being charged with illegal activities. By using the anonymous disclosure option, people do have the ability here to save themselves a bit of money before they have to contact a professional. It does give insight to the taxpayer on what to expect as they begin to use the VDP. By all means, it was the issue of money that caused the situation in the first place! Sometimes, it is impossible for someone to afford to pay his or her taxes one year due to the current global economy. The Voluntary Disclosures Program is a terrific tool for individuals to use to save themselves from any charges for not reporting previous issues. By using the VDP, it shows the CRA that the individual self-recognizes issues at hand and is willing to correct it. The old adage of “If someone is honest, they have nothing to hide.” applies here. It would be more expensive for the CRA to try to pursue someone for monies owed than it is for someone to admit guilt or fault on their own through a structured system. It saves time and hassle for the CRA, plus brings revenue back that was once lost.