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A Canadian Taxpayer’s Information to the Voluntary Disclosure Program

You can’t legally avoid paying taxes wherever you live. Every country requires its citizens to pay a levy if their income crosses a specified threshold. It’s one of governments’ primary revenue sources. In Canada, about 27.2 million individuals filed their returns in 2019.

However, circumstances may result in some taxpayers occasionally defaulting on their legal obligation. If you make such a mistake and take no steps to correct it, you’ll face penalties and interest charges when caught. You could also be imprisoned, which leads to having a criminal record.

Fortunately, some countries have programs that offer defaulters the opportunity to voluntarily come clean and be exempt from penalties and jail terms.

The Canadian Revenue Agency’s Voluntary Disclosure Program (VDP) is such a scheme, giving taxpayers a second chance to fulfill their obligations. 

Here’s a simplified guide to explain what the VDP is about and its requirements. We advise you to consult a CPA or tax professional for more details or view online.

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What Is the Voluntary Disclosure Program?

The VDP offers relief to taxpayers who come forward to correct mistakes in their tax filings before the Canadian Revenue Agency finds out and contacts them.

Every application is decided on a case-by-case basis.

What Are the Reliefs?

If you qualify, you’ll be free from prosecution. In some cases, the CRA may waive penalties and partial interest that you’re liable to pay.

However, you must pay whatever tax amount you owe and the remaining portion of the interest after deducting the relief. 

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The VDP is meant to be fair to Canadians who file and pay their taxes on time. So, defaulters whose error is unintentional get a higher relief than those who intentionally avoid paying taxes. 

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Should You Apply for the VDP?

If you’ve made one or more of the following mistakes, you’re eligible to apply:

  • You didn’t submit a return, and it’s now overdue
  • You received income that you didn’t report
  • You claimed non-deductible expenses 
  • You filed an incomplete tax return
  • You made a mistake when calculating your taxes 
  • You inadvertently under-reported your income 
  • You misinterpreted the taxation law

You’ll be doing yourself a huge favor by coming forward and correcting your mistakes because the CRA has sources reporting financial information that will include your income. If you don’t act when given a chance, the law will catch up with you eventually.

Acceptance Criteria

Be aware that you won’t automatically qualify for relief under the Voluntary Disclosure Program. You must fulfill the following criteria: 

  • You’re coming forward voluntarily and not after receiving a notice from the CRA.
  • You’re likely to incur penalties.
  • You’re filing a later return or correcting a previous error.

Get Professional Help

Unless you’re an expert in taxation matters, you should not try to interpret tax laws. The CRA has imposed stringent criteria for taxpayers to meet before they qualify for the VDP. You’ll have a better chance of succeeding in your application if you seek help from a professional.

Messing with the CRA can lead to severe repercussions. You could incur heavy penalties and even end up in prison.

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