I haven't reported everything to the CRA. Should I come in from the cold?

Nobody’s perfect; everyone deserves the opportunity to correct their mistakes, and the Canada Revenue Agency (“CRA”) agrees. If you have discovered an error or omission on previous tax returns, or haven’t filed tax returns at all, the CRA’S Voluntary Disclosure Program may benefit you. This may include situations where you did not report or under-reported your income or claimed ineligible expenses.

What is the voluntary disclosure program?

The Voluntary Disclosure Program (“VDP”) allows taxpayers to disclose inaccurate or incomplete information from previous taxation years to the CRA to bring themselves into compliance with their legal obligations, without facing penalties or criminal prosecution. 
The VDP is divided into two tracks, a general program and a limited program. The limited program offers more limited relief and applies to non-compliance with an element of intentional conduct and to corporations with gross revenues exceeding $250 million. 
What are the advantages of a voluntary disclosure?

If accepted, a voluntary disclosure application has three benefits. 

First, the CRA will grant relief for up to half of the interest owed. This is significant. The current CRA interest rate for unpaid income tax and HST is 9%. 

Second, the CRA will not charge penalties on a taxpayer. This is also significant. Various penalties can apply where a taxpayer doesn’t file a timely return or fails to accurately report their affairs. For example, a misrepresentation in an income tax return due to gross negligence can attract a penalty of 50% of the tax which would have been owed under an accurate return.

Third, the CRA will not refer the matter for criminal prosecution. Failure to file returns or pay amounts owed can be a criminal offence under the income tax and HST legislation. The voluntary disclosure program offers taxpayers protection from the possibility of prosecution. 

What criteria do I have to satisfy to make a successful voluntary disclosure? 

There are five criteria for qualify for relief under the VDP. All these criteria must be met:

1. The disclosure is voluntary; i.e. you are applying before CRA has taken action against you or other people in relation to the issue;
2. The disclosure contains complete information (i.e. all relevant information or documentation in relation to the mistake or omission);
3. The disclosure involves the potential application of a penalty;
4. The disclosure includes information more than one year, or one reporting period for GST/HST, overdue; 
5. The disclosure includes payment of the estimated tax owing (or a satisfactory request for a payment arrangement). 

Can I use the voluntary disclosure program more than once? 

Under CRA’s policy, you generally cannot make a second application under the VDP unless the second application relates to a different matter and the circumstances surrounding the second disclosure were beyond your control. 

Can I make an anonymous or “no-name” application? 

No. If you are unsure if you should apply for the Voluntary Disclosure Program, the CRA offers a service which allows taxpayers to receive more information about the VDP and the process, and an understanding of its application to their specific circumstances. These discussions are anonymous and non-binding for either of the taxpayer or the CRA.