Article by Jonathan Wright. Click here for homepage.
Tax is complicated. Mistakes happen, even to professionals.
Unfortunately, these mistakes, especially ones carried on over a number of years, can be expensive. In recovering a tax debt, the CRA can go after a person’s assets and even his or her home. Even in circumstances where no tax was owing (such as a missed form) penalties can mount up.
Fortunately, the CRA has a program for individuals, trusts and businesses to voluntarily disclose their tax issues and details and then receive a waiver of penalties and sometimes a reduction in interest.
I wrote about this briefly in an earlier article and now turn to it in greater detail.
The program is called the “Voluntary Disclosures” program. The process works as it sounds. A taxpayer explains the details of the overlooked tax matter or delinquent tax issue and provides the missing returns or forms which were required. If the CRA approves the disclosure, they waive all penalties and sometimes even interest.
There are four requirements for a successful voluntary disclosure.
1. It must be voluntary.
In brief, this means that the CRA hasn’t begun any action against the taxpayer which already has or might in the future uncover the tax issues being disclosed. For example, a disclosure won’t be voluntary if a company under audit for unreported income discloses that unreported income.
2. It must be complete.
The CRA wants you to come in from the cold. No tax issues can be withheld. If a deliberately-suppressed tax issue comes up during the course of the disclosure, this issue could put the entire disclosure in jeopardy.
3. It must involve a penalty.
This is satisfied in most circumstances where tax issues arise. If you don’t report income or file a form you are required to file, this will involve a penalty.
4. It must be one year past due.
In other words, the issue occurred in 2015 or before. If the issue began more than a year ago and continues to this day, the ongoing issue may still be included.
The process begins with hiring a tax practitioner, such as Wright Legal, to gather your information and put together your explanation for non-compliance. For most of my clients the reason for the tax issue simply comes down to a misunderstanding of what was required.
The tax practitioner will then work closely with your accountant to put together the returns or forms that should have been filed. If you don’t have an accountant, we would be happy to provide you with the contact information for a number of accountants we trust.
You can proceed either on a no-names basis or provide your name. In order to qualify you eventually need to provide your name, so we only proceed on a no-names basis if you still need time to put together materials to make an adequate disclosure.
If you would like to come in for a consultation on your tax matters, or are wondering about tax planning opportunities for you personally or for your business, please do not hesitate to contact the author at firstname.lastname@example.org or 604.678.4459, or visit our website at wrightlegal.ca.