The Voluntary Disclosures Program (VDP) in Canada is a program implemented by the Canada Revenue Agency (CRA) to allow taxpayers, both individual and institutional to come forward and correct past tax returns that may have erroneous or inaccurate information. If the taxpayer meets certain conditions of the disclosure being considered voluntary the CRA will not penalize or charge the taxpayer with income tax evasion. Voluntary disclosures to the CRA are considered voluntary only when no income tax charges have yet been filed, there is no active investigation of the taxpayer, and no previous record of tax fraud or evasion. Disclosures are allowed for income tax which includes income from pensions, self-employed business or employment and capital gains that have gone unreported. Businesses may disclose unreported goods and services tax (GST), harmonized sales tax (HST) as well as a industry specific tax assessments due to regulation like the Softwood Lumber Products Export Charge Act. If the tax assessor at the CRA considers the disclosure valid they have the option to immediately cancel or waive penalties or interest otherwise payable. In order to be considered a valid disclosure, the disclosure must have four qualities: it must be voluntary, it must be complete, it must involve a potential or ongoing tax penalty. and it must include information about a previous tax year. The current Voluntary Disclosure Program (VDP) Taxpayer Agreement form is (Form RC 199E) and must be filed by mail. For all current year changes to tax filings for Canadian citizens, the Canada Revenue Service offers online services and the T1-ADJ T1 Adjustment Request which can be filed by mail.
The Voluntary Disclosure Program is operated as an administrative program wholly operated within the CRA and all first level and second level appeals will go through the CRA before judicial review through the Federal Court System will be granted. The VDP requires a complete and thorough disclosure that would be similar to the thoroughness of a CRA auditor and there are former CRA auditors and accountants trained by them that offer services for taxpayers who wish to use the VDP program. These services tend to make the disclosures transparent and easy to read through for the CRA agent who will be tasked with deciding on whether or whether not to accept the forms filed as a valid claim. Checking and double checking the claim forms is important as anything left out in the original claim must be submitted as a separate VDP claim and unless it is considered to be an entirely new claim it will be considered invalid. If a taxpayer in disclosing information in a VDP form of criminal enterprise they may be denied and charged in a criminal investigation under the Excise Tax Act which makes the VDP and all disclosures done to the Canadian Revenue Agency may be used to investigate and charge taxpayers with federal and provincial crimes. Taxpayers who are seeking relief often have a lawyer look over the VDP form for potential liabilities for this reason.
The Canada Revenue Service allows taxpayers who wish to utilize the Voluntary Disclosure Program two methods of doing initializing the claim. The named disclosure method uses the taxpayer’s name or Business Taxpayers who are unsure they want to proceed with a disclosure are also allowed to participate in discussions about their tax situation on a “no-name” basis. Advice based on the claim submitted on a no-name basis can then be done so in a manner where the CRA may advise action without prejudice. If a discrepancy between the information provided and information verified once the taxpayer identifies himself, this preliminary advice may be invalidated. A no name disclosure like a named disclosure may only be submitted once per unique claim per the VPD.
Each Voluntary Tax Disclosure claim form must first have the following basic information: the name, telephone number, address, social insurance number, postal code, any authorized representative such as a lawyer or accountant, gender, age. Secondly the documentation for the claim itself must be formatted in a readable manner and printed copies must accompany all forms of digital documentation such as spreadsheets. Documentation must address: the amount of the disclosure if known, the type of returns involved, the types of forms returned, the type of omission (income, unremitted GST/HST, capital gain) on each return, reason for each omission and if applicable primary business activity. In concluding the claim an explanation for on how the taxpayer’s submitted documentation and claim satisfies the four validity conditions previously discussed conditions of it being: voluntary, complete, involve a potential or ongoing tax penalty. and include information not about the current tax year but at the same time not be older than ten years. The Voluntary Tax Disclosure is an tax amnesty program for all Canadian citizens, temporary workers and permanent residents filing taxes.