Voluntary Disclosure of Unfiled TaxesIn this chat, I'm going to touch on my limited knowledge of CRA's Voluntary Disclosure Program. So warm up your tea cup and join me for the next five minutes to understand your options.
 Custom Search Do you have years where you (or your clients) have failed to file a return ... or perhaps the tax return filed wasn't an accurate tax return because of unreported income ... or understated sales ... or overstated expenses? In Canada, our system is a self assessing system and relies on voluntary compliance. The purpose of the voluntary disclosure program is to encourage individuals to self-correct incomplete or inaccurate information, and past omissions; while granting relief to those who satisfy all the conditions through waiving interest, penalties, publicity, and prosecution. The request must be in writing by letter ... or use CRA Form RC199. The voluntary disclosure date is when the CRA has received the request OR the date the taxpayer (or their representative) signs the client agreement form. You must meet four conditions to qualify for the program. The four conditions are:
You must pre-plan your disclosure because you only have a 90 day deadline to provide CRA with the type of returns involved, type of information returns, type of omission, primary business activity along with an explanation of how you feel you have met the four validity conditions that must be met. There are two options when applying - with a name disclosure OR as a no-name disclosure ... each has different information requirements. There is a procedure to follow to make a voluntary disclosure ... and it is advisable to follow it and not cut corners.
Penalties apply for failure to comply with the Income Tax Act (ITA). Technically, it is a criminal offense not to file a tax return for any reason ... but CRA rarely prosecute solely for not filing ... but it could happen. My references say penalties include:
If CRA has already made a demand request, you are no longer eligible for the program. So ... first important rule in doing business in Canada ... each year pay CRA by the filing deadline ... estimating the tax payable if necessary. My favorite tax site has a great income tax calculator you could use to this do estimate. In closing, Lohn Caulder CA has a very good article on Undeclared Income that may be of interest to you.
Go To Amending A Tax Return to Avoid Penalties
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