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Tax Tip: Correct your taxes with the Voluntary Disclosures Program


Thursday, May 9, 2019 10:17:00 AM

The Voluntary Disclosures Program (VDP) gives you a chance to correct inaccurate or incomplete information, disclose information not reported in a tax return you previously filed, or file a return that you should have filed. If you file a VDP application and it is accepted by the Canada Revenue Agency (CRA), you will have to pay the taxes owing, plus any applicable interest. However, you will also be eligible for relief from prosecution and, in some cases, from penalties and some of the interest that you would otherwise be required to pay.

As the majority of Canadians file and pay their taxes in full and on time, it is important that the relief provided under the VDP be fair and not reward individuals or corporations looking for a way to avoid paying their share of taxes.

To ensure fairness for Canadians, applications for relief submitted by taxpayers who intentionally avoid their tax obligations will not get the same relief as those who want to correct an unintentional error.

On March 1, 2018, the VDP implemented two policies to ensure greater fairness for all Canadians.

The first policy is the Information Circular IC00-1R6 (IC00-1R6), which covers the Income Tax Stream (Income Tax Act) applications.

The second policy is the GST/HST Memorandum 16-5, which covers the GST/HST Stream. The GST/HST Stream includes applications regarding excise duties under the Excise Act, 2001, excise tax and GST/HST under the Excise Tax Act, as well as charges under the Air Travellers Security Charge Act and Softwood Lumber Products Export Charge Act, 2006.

Accepted applications under IC00-1R6 will receive relief under one of the following tracks:

Track One: General Program

The General Program provides relief to taxpayers who want to correct unintentional errors. Taxpayers will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed. The CRA will provide partial interest relief for years preceding the three most recent years of returns required to be filed.

Track Two: Limited Program

The Limited Program provides limited relief for applications that disclose non-compliance where the facts suggest that there is an element of intentional conduct on the part of the taxpayer or a closely related party. Taxpayers will not be referred for criminal prosecution with respect to the disclosure and will not be charged gross negligence penalties. However, they will be charged other penalties and interest as applicable.

In order to be eligible for relief under IC00-1R6, all applications must meet the following five acceptance conditions:

- It must be voluntary, which means you must submit your application before the CRA takes any enforcement action against you or anyone related to you on the same information disclosed in your application.
- It must be complete, which means that you must include all relevant information and documentation (which includes all returns, forms, and schedules needed to correct the error or omission).
- It must involve the application or potential application of a penalty.
- It must include information that is at least one year past due.
- It must include payment of the estimated tax owing.

Additionally, if the CRA has already received information on a taxpayer's potential involvement in tax non-compliance, the CRA will reject that taxpayer's application to the VDP. An example would be a leak of offshore financial information.

Some examples of the types of applications that are typically eligible for relief under IC00-1R6 are:

- omitted or underreported income;
- expenses claimed in error;
- failure to remit source deductions for employees (for example Canada Pension Plan / Quebec Pension Plan deductions), and;
- failure to file an information return (for example T1135 Foreign Income Verification Statement).

Do you have questions about making a VDP application?

If you are unsure if you want to proceed with an application, you can use our pre-disclosure discussion service to participate in preliminary discussions about your situation on an anonymous basis. This discussion will allow you to get insight into the VDP process, a better understanding of the risks involved in remaining non-compliant, and the relief available under the VDP.

Pre-disclosure discussions with a CRA official are for your benefit; they are informal, non-binding, and may occur before your identity is revealed. These discussions do not constitute acceptance into the VDP and have no impact on the CRA's ability to audit, penalize, or refer a case for criminal prosecution.

To speak with a CRA official, please contact General Inquiries:

- Individuals (Canada and the United States): 1-800-959-8281
- Businesses (Canada and the United States): 1-800-959-5525
For all other telephone numbers, go to: Telephone numbers – Canada Revenue Agency

How do you make a VDP application?

The process is easy and you can do everything yourself.

- Fill out and sign Form RC199, Voluntary Disclosures Program (VDP) Application, or write a letter with the same information found on the form.
- Submit your completed form and all returns, forms and schedules required to change the error or submission using the submit documents online service available through
My Account, My Business Account, and Represent a Client.
- Log into the portal and click on "Submit documents" at the top right side of the page.
- Select "I do not have a case or reference number," and then select "Form RC199 Voluntary Disclosures Program (VDP) Application, or a letter with the same information."
- Upload Form RC199 or your letter, the returns, forms and schedules and provide a short file description.
- After submitting the document(s), make sure to save the case/reference number we give you on the "Submit documents – confirmation" page for your records.
- If you need to add more documents, repeat the process using the same case/reference number as many times as you need to complete your disclosure.
- Check your mail because we will send you an acknowledgement letter after receiving your disclosure submission. The letter is normally sent within two weeks and will include information about the next steps in the process.

Note:
If someone is making the application for you (such as your spouse or common-law partner, other family member, friend, or accountant), you must ensure that your application is signed by you and your representative, and that the CRA has your consent on file for that representative. To authorize someone, go to: Authorizing a Representative.

You can also send your completed Form RC199 or letter with the same information to:
The Voluntary Disclosures Program
Shawinigan National Verification and Collections Centre
4695 Shawinigan Boulevard
Shawinigan QC G9P 5H9

Or by fax: 1-888-452-8994

To learn more about the VDP, go to canada.ca/taxes-voluntary-disclosures.