The CRA understands that not all taxpayers are up to date with their tax filing and payment and there are some taxpayers who would like to pay but not in a position to do so. The VDP – Voluntary Disclosures Program gives taxpayers the chance to voluntarily admit that they owe taxes or they have not filed tax returns. As tax always has to be filed and paid, the VDP Canada comes in for people who have fallen behind. VDP Canada is a taxpayers’ preferred alternative to deal with tax problems such as late filing or unreported income.
The VDP Canada is easy to understand but not always easy to go through the process. For this reason you may find that you need help to get the best result when you apply. If the correct process is not followed there can be fines, interest added and even a freeze order put on your bank account. If you have undisclosed tax problems and the CRA discover this themselves, it is unlikely that they will work with you to reduce tax owed. If you own up and come clean about the fact that there are things you have not disclosed, then the VDP Canada will certainly work in your favor.
By entering VDP Canada, the principal amount will have to be paid back, and it is likely that the interest will also have to be paid. The good news is there will not be a late-filing penalties or even worse; prosecution. By working with a qualified tax consultant, you get better chance to be accepted by the VDP division and thus save yourself from hefty penalites.
In case you are not sure what is covered under VDP Canada, if you fail to report all earned income; not filing tax returns, claiming expenses that you are not entitled to and not submitting all source deductions.
Unfortunately just because you want to apply for VDP Canada, it does not mean that you are eligible. There are a number of criteria that must be met. Such as your disclosure has to be voluntary meaning that the CRA or other authority has not contacted you yet; the disclosure has to be complete meaning you disclose all the problems, not just partial. The disclosure must involve penalties; you do not need to go through the VDP Canada if you do not have tax owing or no penalties applying to you; Finally, if for late filing, it must be more than one year overdue.
Meeting with an experienced tax consultant will be helpful in that they will be able to properly guide you through to ensure the most complete and appropriate submission of your disclosure.