When a taxpayer feels that the filing of the tax return was not so accurate, there are bound to be fears concerning possibilities of a CRA audit and assessment. This will also be the case for those employers who have not remitted their Sales Taxes or their payroll deductions. It will be a nightmare of suspense for an individual who has not bothered to disclose the earnings from abroad. All such people should actually thank the CRA for implementing the Voluntary Disclosure program.
Now, a taxpayer can rectify inaccurate or insufficient filing of tax returns without being afraid of penalties or prosecution. Voluntary disclosure allows these taxpayers to prepare and then assess the outcome of their disclosure. They can do this either on a named or even on an anonymous basis.
In the case of a named voluntary disclosure, the taxpayer will have to provide a Form RC 199 or a Taxpayer’s Agreement Form, along with the full postal code and other contact details that include the Social Insurance Number. In the case of an anonymous voluntary disclosure, the taxpayer will have to disclose only the first three digits of the postal code and the contact information of its representative, the gender and age of the individual, the taxation years and the reporting periods that are going to be involved in the voluntary disclosure. Other things that have to be disclosed are the amount of the correction in taxes, the type of the return which is involved, the type and the reasons for their earlier omission, the principal business activity of the submitter and how he or she will be able to meet the conditions of use set by the CRA.
There are several benefits to using the voluntary disclosure program. The principal one being the way it provides the taxpayers a safe method, relatively speaking, of rectifying the deficiencies in their previous tax return filings. The other biggest benefit is the prevention of the enforcement procedures special investigations into your financial affairs. The CRA will not take any action against the taxpayer if he or she discloses before an investigation notice of assessment or an audit is initiated. The taxpayers have to be aware that the consequences of a criminal prosecution can lead to a jail time of one year per charge along with penalties that may range anywhere from a thousand to twenty five thousand dollars. Many taxpayers have lost sleep and have suffered emotional stress from this burden.
People who avoid thinking about voluntary disclosure have to be aware that the penalty for late filing on the first offence is five per cent of the balance of the taxes that is outstanding and one per cent for every month that the balance will remain outstanding to a maximum period of one year. For any additional offence, the penalty goes up to ten per cent of the balance which is outstanding and two per cent for every month to a maximum period of twenty months. Interest is also added to the principal amount and it is charged in the next month.