The Canada Revenue Agency has established a program to help its citizens correct and pay back taxes that may have been filed or misfiled in previous years. The Voluntary Disclosure Program or VDP allows for any individual or business to report their late taxes at no additional penalty. Canada allows for its citizens to self-assess and report their income taxes on a yearly basis. These income taxes are generally fifteen percent of annual income. The VDP is a program inside the Enforcement and Disclosures Directorate. The program serves as a way to avoid auditing its citizens which usually results in heavy penalties. While there have been several modifications over the years to the VDP, the process of filing the voluntary disclosures has remained quite consistent.
There are certain steps that must be taken to ensure that a valid disclosure is being filed. First, a valid disclosure must meet all the necessary requirements, which first and foremost, must be voluntary. A valid disclosure usually includes information that is at least one year overdue, but no longer than ten years overdue, and the disclosure must be complete. Certain forms will need to be filled out to ensure that the disclosure is filed properly. These include Form RC199 or Form T1013. Form RC199 is to be signed by an individual; a letter providing information similar to that in RC199 will also be accepted. T1013 is to be used by individuals using an authorized representative to report their taxes. Once completed, these forms need to be mailed or faxed to the Canada Revenue Agency’s tax centers. On most occasions, the CRA with send an acknowledgement of receipt to the filer informing them of receipt of the disclosure. This is a fairly new practice, beginning in October of 2013. Once the voluntary disclosure is received by the CRA, they will ultimately make a decision regarding the filing. Contact is made through mail. An individual at that time can then set up payment arrangement or dispute the decision of the CRA. Interest will accrue on all outstanding balances until the entire amount is paid in full. If an individual decides to dispute the decision of the CRA, they can request a second review of their file. A letter must be written to the Director of the tax center. A second review will only be considered if all information regarding the disclosure was submitted correctly upon the first filing and the rejection of the voluntary disclosure was not due to inadequate information. Disclosures can also be submitted anonymously. This is called the “no-name” method. The tax payer must prove that all guidelines of a valid disclosure are met just as when a valid disclosure is made where the tax payer is identified. The taxpayer then has ninety days once a letter is received back from the Canada Revenue Agency is disclose his or her identity. If the identity of the taxpayer is not revealed in that ninety days, then the file is closed and the disclosure rejected. Once the identity of the taxpayer is revealed, the CRA will make a decision on the case in the same manner as the other valid disclosures where the identity is revealed upon submission.
The Voluntary Disclosure Program not only helps the citizens of Canada, but also the government as well. Citizens do not feel afraid to report incorrect or nonexistent tax statements, because there is no additional penalty. Once these taxes are submitted correctly, individuals or businesses are then asked to pay the owed taxes plus interest. On most occasions, all penalties are avoided. It is imperative however that the disclosures be filed correctly. As beneficial as this program seems to be, misfiling a voluntary disclosure could result in future problems for the taxpayer. If all provisions of submission are met, the Voluntary Disclosure Program seems to be of great benefit to individuals trying to clear up past tax discrepancies. While citizens get to create a clean slate, the government is able to collect the back taxes owed to them. These taxes are then used to fund roads, national projects, and clear up national debt. A program like this which offers its citizens amnesty from punishment is a benefit to the citizens and the nation as a whole.