The Voluntary Disclosures Program (VDP) initiative by the Canada Revenue Agency (CRA) allows taxpayers to correct inaccuracies or omissions in previously filed tax returns voluntarily. If you’ve made a mistake on a past return or failed to report income, the VDP offers a way to rectify these issues while potentially avoiding penalties and prosecution. At GTA Accounting, we’ve prepared a detailed checklist to help you gather the necessary information for a successful VDP application and correct any errors in your tax filings.
What is the Voluntary Disclosures Program (VDP)?
The VDP allows individuals, corporations, and trusts to disclose inaccuracies in previously filed returns voluntarily. It applies to various types of tax obligations, including:
- Income tax
- GST/HST
- Source deductions
- Foreign reporting requirements
The program offers significant relief from penalties and, in some cases, partial interest relief, provided that the disclosure is complete and voluntary and the CRA has not already initiated enforcement action. This means you can correct your tax errors without the fear of facing penalties or prosecution.
For more information on the VDP, visit the CRA’s Voluntary Disclosures Program page.
How to Qualify for the VDP
To qualify for the VDP, your disclosure must meet specific conditions:
- Voluntary: The disclosure must be made before the CRA contacts you.
- Complete: You must include all relevant information about the issue(s).
- Involves a penalty: The disclosure must relate to an issue that could result in a penalty.
- Over a year overdue: The disclosed information must generally be at least one year past due.
GTA Accounting’s VDP Checklist
Our VDP Checklist is a crucial tool to guide you through the application process. It ensures you have all the necessary information for a complete VDP submission, increasing your chances of a successful disclosure.
1. Identification Information
Provide personal or business identification details, including:
- Full legal name (individual, corporation, or trust)
- Social Insurance Number (SIN), Business Number (BN), or Trust Account Number
- Current address and contact information
2. Previously Filed Returns
We require copies of the previously filed tax returns that contain errors or omissions. This includes:
- Income tax returns (e.g., T1 or T2 returns)
- GST/HST returns
- Payroll deduction remittance forms
- Foreign income or property reporting forms (e.g., T1135)
If you do not have copies of these returns, we can request them from the CRA.
3. Details of Errors or Omissions
Clearly outline the specific errors or omissions in your previously filed returns. This includes:
- Types of income not reported (e.g., employment income, dividends, rental income)
- Deductions or credits claimed incorrectly (e.g., medical expenses, business deductions)
- GST/HST errors, such as unreported sales or incorrect input tax credit claims
- Unreported foreign income or property
The more detailed your description, the better we can prepare a complete and accurate disclosure.
4. Supporting Documentation
Gather supporting documents that verify the errors or omissions, including:
- T-slips (e.g., T4, T5)
- Invoices, receipts, or contracts for unreported income or expenses
- Bank statements for unreported financial transactions
- Documentation related to foreign income or property
These documents will help us substantiate the disclosure and provide evidence to the CRA.
5. Reason for the Errors or Omissions
Explain why the errors or omissions occurred in the first place. Common reasons include:
- Misinterpretation of tax laws
- Inadvertent mistakes or oversight
- Changes in circumstances that were not correctly reported
Providing this information is critical for demonstrating to the CRA that the errors were unintentional.
6. Disclosure Period
Determine the time frame of the disclosure, as it must cover all relevant tax years where errors or omissions occurred. The VDP typically requires disclosure of errors going back up to 10 years. However, the exact period may vary based on the nature of the disclosure.
7. Authorization to Represent (Form RC199)
To represent you during the VDP application process, we need you to complete Form RC199, the Voluntary Disclosures Program (VDP) Application. This form allows us to communicate directly with the CRA on your behalf and manage the entire disclosure process.
8. Payment of Taxes Owed
While penalties and interest may be reduced under the VDP, the total tax owed must still be paid. Provide information about your ability to pay the taxes owed, or let us know if you require a payment arrangement. The CRA may consider a payment arrangement for taxpayers facing financial hardship.
How GTA Accounting Assists with VDP Applications
Filing a VDP application requires accuracy, completeness, and a thorough understanding of the tax laws involved. At GTA Accounting, we ensure that:
- Your VDP application meets all CRA requirements.
- All relevant documents are gathered, reviewed, and submitted.
- You receive support during the entire process, including communication with the CRA.
Why Consider Filing Through the VDP?
The VDP offers significant benefits, including the avoidance of penalties, partial interest relief, and legal protection. These benefits should motivate you to consider filing through the VDP and correct your tax errors.
- Avoidance of penalties: Reduced or eliminated penalties on corrected returns.
- Partial interest relief: Reduction in interest charges for specific periods.
- Legal protection: Relief from prosecution for the disclosed errors or omissions.
Conclusion
The Voluntary Disclosures Program allows taxpayers to correct past errors while minimizing potential penalties and legal risks. By following the checklist and working with GTA Accounting, you can ensure a successful VDP application and demonstrate your commitment to compliance with the CRA.
If you believe you qualify for the VDP or have questions about the process, contact GTA Accounting today for expert assistance in preparing and filing your disclosure.