If you have unreported income or undisclosed foreign assets, you may be worried about facing legal consequences or significant penalties. In this situation, the Canada Revenue Agency (CRA) Voluntary Disclosures Program can be an attractive option for taxpayers looking to come clean and rectify their tax situation.
In this article, we will cover everything you need to know about voluntary disclosure, including how to make a voluntary disclosure, who is eligible, and what to expect.
What is Voluntary Disclosure?
Voluntary disclosure is a program administered by the CRA that allows taxpayers to voluntarily come forward and disclose previously unreported income or assets without facing penalties or prosecution. Essentially, the program allows taxpayers to make things right with the CRA and avoid the legal and financial consequences of non-compliance.
Making a voluntary disclosure involves providing the CRA with a detailed account of previously unreported income or assets, including information about the amounts, the source of the funds, and the tax years involved. The CRA will review the disclosure and, if accepted, grant the taxpayer immunity from prosecution and waive any penalties that would normally apply.
Who is Eligible for Voluntary Disclosure?
The Voluntary Disclosures Program is available to individuals, corporations, and trusts that have previously unreported income or assets. In order to be eligible, the disclosure must be voluntary (i.e., the taxpayer must come forward before the CRA takes any enforcement action), complete (i.e., all relevant information must be disclosed), and involve the potential application of a penalty.
It’s worth noting that the program is not available for individuals who are already under investigation or audit by the CRA, or who have received a formal request for information from the CRA. Additionally, the program is not intended for taxpayers who deliberately engaged in tax evasion or other fraudulent activities.
How to Make a Voluntary Disclosure?
To make a voluntary disclosure, taxpayers must submit a disclosure package to the CRA that includes:
- A completed and signed RC199 Voluntary Disclosures Program Taxpayer Agreement form
- A signed letter outlining the facts and circumstances of the disclosure
- Supporting documents that provide details about the unreported income or assets.
It’s important to note that voluntary disclosure packages can be complex, and it may be in your best interest to seek the advice of a tax lawyer or accountant to ensure that your disclosure is complete and accurate.
What to Expect After Making a Voluntary Disclosure?
After submitting a voluntary disclosure package, the CRA will review the submission and determine whether to accept or reject the disclosure. If the disclosure is accepted, the CRA will waive any penalties that would normally apply and provide the taxpayer with immunity from prosecution.
If the disclosure is rejected, the taxpayer will be notified and given an opportunity to provide additional information or make amendments to their disclosure. If the taxpayer does not agree with the CRA’s decision, they may appeal to the courts.
Conclusion
Voluntary disclosure can be an effective way for taxpayers to rectify their tax situation and avoid the legal and financial consequences of non-compliance. However, making a voluntary disclosure can be complex, and it’s essential to ensure that the disclosure is complete and accurate. If you’re considering making a voluntary disclosure, it may be in your best interest to seek the advice of a tax lawyer or accountant.