The Voluntary Disclosure Program is run by CRA to allow taxpayers to report additional unreported income from prior years or to correct overstated expenses. Examples of this may include unreported cash tips for service workers, foreign pension income or other foreign-sourced income streams which are all reportable in Canada.
The benefit to the taxpayer is that the CRA may choose to overlook any penalties that would otherwise apply to the unreported income. This can be a substantial savings depending on the amounts in question. It should be stressed that this a discretionary position of the CRA and they are not committed to grant this immunity, but will consider each case on its own merits.
To qualify for this potential immunity, a taxpayer must first meet the following criteria:
- no prior demand for payment, filing, audit or other action must have been begun by CRA prior to the disclosure (in other words, once they have come looking for the income it is too late to apply for this program)
- the disclosure must involve potential penalties faced by the taxpayer
- the disclosure must include amounts that are more than one year overdue
- the disclosure must be full and complete and include all relevant facts
If these criteria are met then reporting under the program may be a good option to consider when you have omitted amounts on prior returns.
It is also necessary to include a completed form RC-199 agreement for application to the program.
If you are unsure as to the merits of your case, it is possible to make an initial “no-name” application to the program in which all relevant facts are disclosed about your situation, except your name and identifying information. The CRA will not grant an assurance that your situation will be accepted under voluntary disclosure but they may provide a comfort letter indicating whether there is any information that would automatically exclude the case from program eligibility. To receive potential immunity, however, it will be necessary to disclose your identification before a formal application can be made.