Every taxpayer should know that it’s their legal obligation to file their tax return annually. Mistakes happen, though, and if they’re not corrected, you could be liable to penalties and interest, say those at fariscpa.com. Worse, you might end up in jail and have a criminal record.
Some countries offer taxpayers to come clean voluntarily to avoid severe repercussions. In the United States, the Inland Revenue Service (IRS) has a Voluntary Disclosure Practice for those who have willfully failed to fulfill their legal duty.
The Canadian Revenue Agency offers a Voluntary Disclosure Program (VDP) for its taxpayers. However, you must meet stringent requirements to be eligible for the relief.
Here’s a brief explanation of your option to make amends for your tax mistakes. If you want to learn more, you should consult a tax professional or CPA for advice.
Voluntary Disclosure Program
The VDP is the CRA’s initiative to offer Canadian taxpayers a second chance to correct their past taxation mistakes. Please note that even if your application is accepted, you’ll still have to pay the taxes you owe. Also, you’ll have to settle the interest on the overdue amount.
However, you won’t be liable for penalties, and you’ll avoid prosecution.
Reasons for Applying for the Voluntary Disclosure Program
To know if you should opt for the Voluntary Disclosure Program, ask yourself if you’ve made these mistakes:
- You didn’t declare cash receipts.
- You falsely or inadvertently deducted personal expenses from your income.
- You miscalculated your taxes.
- You under-reported your income due to an oversight.
- You misinterpreted the tax law.
If you affirm any of the above facts, then the VDP is your best way forward.
It’s in your best interests to take action to come clean. The CRA has sources that provide them with financial information about your dealings. So, you’ll get caught eventually.
Criteria for Acceptance
Now that you’ve decided to apply for the Voluntary Disclosure Program, you should know that your application has to meet specific criteria. You won’t automatically qualify.
Here are the requirements that’ll determine your eligibility:
- Your disclosure has to be voluntary and complete.
- You must risk incurring penalties.
- You have to provide information that’s at least a year overdue or a correction of a previous error.
At a glance, they may look simple, but they’re not clear-cut. There are many questions to be answered. Unless you’re well-versed with the tax laws, you’ll need expert advice.
It’ll cost you money, but you’ll want to submit the proper documents and qualify for this program. Upon a successful application, the CRA will waive interest and penalties as far back as ten years. You’ll also avoid criminal prosecution.
Seek Professional Help
You don’t want to mess with the CRA or any tax agency. The consequences can be very severe. It can cost you a lot of money in penalties, and you can end up behind bars.
The Voluntary Disclosure Program is an excellent opportunity for you to make amends before you get caught. However, due to the stringent criteria, you must seek professional assistance from a CPA or an expert in taxation matters to be successful.