Have you ever accidentally filed a tax return with an error? Or was there a time that you missed out on filing a certain tax return? Generally, hiring small business tax accountants in Canada should keep any of these mishaps from happening. However, accidents do happen. Luckily, in Canada, you get another shot at it. 

The Voluntary Disclosures Program 

You get a second chance through the Voluntary Disclosures Program or VDP. When you make use of the VDP, you can ask the CRA (Canada Revenue Agency) for relief from any interest, penalties, and prosecution connected to your lapse. It lets you tell the CRA about any of the oversights as mentioned earlier, as well as any failure in disclosing that you have foreign assets or property, without harsh penalties. 

 

What circumstances warrant using the Voluntary Disclosures Program?  

You need to file information disclosures about foreign income, foreign property, or foreign corporation shareholding alongside your tax returns to the CRA annually. A large number of people are unable to file these every year for varying reasons. Making use of the Voluntary Disclosures Program is recommended at this stage. Some end up not filing their Income Tax Return (T1 or T2) altogether. The VDP can also be made use of in this instance. 

 

What happens after you apply for the Voluntary Disclosures Program? 

The CRA has the discretion as to whether or not they will accept your VDP application. If they do, aside from paying the taxes you owe, you must pay interest that applies. Additionally, you will be eligible for prosecution relief. Depending on your case, you may be relieved of some interest that would have been required of you. A good way to prevent any of these oversights in the first place is to get reliable tax accounting services in Canada. 

In the interest of fairness, if you chose to avoid your tax obligations on purpose, your application will not get the same relief as those who made an honest mistake. 

The VDP introduced two new policies in March of 2018 to further secure fairness. 

  • GST/HST Memorandum 16-5: This policy covers the GST/HST Stream. This includes GST/HST applications under the Excise Tax Act, excise duties under the Excise Act, 2001 excise tax, and charges that fall under the Softwood Lumber Products Export Charge Act, 2006 and the Air Travellers Security Charge Act.

 

  • Information Circular IC00-1R6 (IC00-1R6): This policy covers applications under the Income Tax Stream (Income Tax Act). 

 

When your application is accepted under IC00-1R6, relief comes through one of two tracks: General and Limited Program. The first is for those who made an honest mistake, while the second is for those who intentionally failed to comply in the first place. 

 

Conclusion 

When you file your taxes incorrectly, there is a possibility that you can get relief from severe penalties. You may apply for the Voluntary Disclosures Program or VDP. If your application is accepted, the relief you get still depends on whether the misfiling was intentional or not. 

In need of tax and accounting services? Reach out to Blueprint Accounting, Inc. today! We’re a cloud accounting firm that offers small business bookkeeping, accounting, and corporate tax services. 

 

 

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