Canada Revenue Agency (CRA)
The Voluntary Disclosure Program (VDP) is a program created and administered by the Canada Revenue Agency (CRA), which permits taxpayers to amend or correct their previous tax filing or reveal information to the Canada Revenue Agency not previously provided in their tax return. The purpose of the program is to allow taxpayers to come forward out of their own accord to amend their tax return without fear of criminal prosecution and reduce the likelihood of additional penalty charges being applied to the taxes owed to the government of Canada. (NOTE: it is a commonly held belief that additional penalty charges will not be applied upon being accepted into the Voluntary Disclosure Program. This is FALSE. In some cases, additional penalties are still charged even if the application into the program was deemed as valid by the Canada Revenue Agency).
It is important to note that the Canada Revenue Agency publishes contradictory information with regards to penalty relief which may confuse many taxpayers who are considering participating in the Voluntary Disclosure Program. On the one hand, the CRA states:
“If the CRA accepts a disclosure as having met the conditions set out in this policy, it will be considered a valid disclosure and the taxpayer will not be charged penalties or prosecuted with respect to disclosure.. And on the other hand, it states in the same publication that .the Minister does not have to grant relief under the VDP provisions. Each request will be reviewed and decided on it.s own merit. If relief is denied or partly granted, the CRA will provide the taxpayer with an explanation of the reasons and factors for the decision.”
This is where the expert advice of a tax lawyer is crucial. The last thing a taxpayer wants or expects is to be accepted into the Voluntary Disclosure Program only to be told that penalty charges will only be partially waived, or even worse, not waived at all! A tax lawyer will be able to advise the taxpayer as to what he or she can expect from this proceeding, whether it is advisable to participate in the Voluntary Disclosure Program at all, and defend the taxpayer.s rights if the Canada Revenue Agency decides to go back on their agreement. Small business owners and self-employed individuals may call Barrett Tax Law for a free legal consultation with an experience tax lawyer to get all of their questions and concerns addressed at 1-877-8-TAX-TAX orconsultations@fightthecra.ca. All consultations are protected by lawyer-client privilege and are thus completely confidential, regardless of whether the taxpayer hires Barrett Tax Law to represent him or her.
Disclosures under the VDP can be made only for income tax filings, excise taxes, excise duties under the EA 2001, source deductions, GST/HST filings, and ATSCA and SLPECA charges. The taxpayer would still have to make the necessary payments plus any applicable interest charges to the Canada Revenue Agency, but the taxpayer would not be subject to criminal prosecution and may be free from having to pay additional penalty charges. The CRA also may provide partial relief for applicable interest charges, but that is solely under the discretion of the Canada Revenue Agency. All of the benefits that a taxpayer could receive from the Voluntary Disclosure Program are subject to acceptance into the program by an authorized VDP agent.
No, not all applications to the CRA.s VDP are accepted. There are certain requirements that must be met in order for the Canada Revenue Agency to accept the disclosure and apply the benefits of such disclosure (i.e. no penalties or criminal charges). It is completely up to the discretion of the authorized VDP agent to decide whether or not the requirements have been met and consequently have the disclosure declared as valid.
If a voluntary disclosure is made by the taxpayer to the VDP, which means the taxpayer discloses all of the information he or she had omitted or reveals the errors made in their filing(s), and the CRA deems the disclosure as invalid, then the taxpayer would indeed be subject to whatever penalties the CRA thinks should be applied given all of the information that the CRA now knows about the taxpayer.s file. The taxpayer may even be subject to criminal charges brought on by the Canada Revenue Agency.
There are four conditions that must be met in order for the disclosure to be accepted and deemed eligible under the Voluntary Disclosure Program. These conditions are as follows:
1. The disclosure must be completely voluntary and a) not due to the taxpayer.s knowledge that the CRA was going to investigate or audit him or her over the information being revealed OR b) not due to the CRA or any other governmental authority already having started an investigation or other enforcement action(s) against the taxpayer, such as a .Request to File. form already having been sent to the taxpayer prior to the disclosure, OR c) not due to an investigation or enforcement action having been taken against any entity associated with the taxpayer making the disclosure, like a corporation or spouse or business partner, where that investigation or enforcement act is adequately connected to the information being revealed in the disclosure and these actions would have likely exposed the information being divulged.
2. The disclosure must be complete where all of the information being provided in the disclosure is true and provided in its entirety without any intentional omissions, and all of the documents required for the validity of the disclosure is also submitted or delivered within the specified timeframe made by the VDP agent.
3. The disclosure must involve some sort of penalty that would have been applied if the information provided would have been discovered by the CRA prior to the disclosure. For example, if the taxpayer ends up not owing the CRA any taxes or a tax refund is expected for the taxpayer, then the application for the VDP would be ineligible and would instead be handled via normal processing methods.
4. The disclosure must include information that is at least one year overdue
An anonymous or “No-Name” disclosure can be made to the Canada Revenue Agency for the purposes of letting a taxpayer know whether or not he or she would qualify under the Voluntary Disclosure Program. If all of the necessary information for a disclosure is provided to the VDP agent with the exception of the name of the taxpayer, then the VDP agent can review the information and advise the anonymous taxpayer on what the tax implications would be for the disclosed information. However, if the taxpayer then decides to go through with the disclosure and submits his or her identity to the CRA and the information provided changes or is not the same as it was when it was given anonymously, then the disclosure could be declared invalid and consequently have any penalties or charges made against the taxpayer. There is a 90 day time-limit to disclose the identity of the taxpayer once a “no-name” disclosure has been made. Also, duplicate “no-name” disclosures for the same information and the same taxpayer cannot be made. If said taxpayer has already made a “no-name” disclosure and let the 90 day time-limit pass for identifying him or herself to the CRA, then the second disclosure would have to be a named disclosure where the taxpayer identifies him or herself to the CRA immediately upon making said disclosure.
Although one can theoretically apply to the Voluntary Disclosure Program without the expert advice of a tax lawyer or assistance of any other tax professional, it is highly recommended that the taxpayer seek the legal guidance of a tax lawyer to ensure that the application to the Voluntary Disclosure Program is 1) the best option for the taxpayer given the circumstances and given all of the potential dangers that one is exposing him or herself to by providing potentially incriminating information to a governmental authority and 2) submitted in the proper format so as to not have the application rejected and consequently be left vulnerable to penalties and/or criminal prosecution.
It is important to remember that once a .named. voluntary disclosure has been made, there are no “take-backs”. The Canada Revenue Agency now has all of the information necessary to apply penalties and even criminal prosecution – all because of information the taxpayer innocently submitted to the Canada Revenue Agency under the pretext that the CRA would not use the information against them to apply said penalties! Even if the taxpayer submits a “no-name” or anonymous application to the VDP, it is still recommended that the taxpayer consult a tax lawyer because 1) if the application is submitted improperly and is subsequently rejected by the CRA, then the taxpayer has effectively lost their only opportunity to submit an anonymous voluntary disclosure to the Canada Revenue Agency since the CRA will not accept duplicate “no-name” applications from the taxpayer for the same information and 2) if the application is submitted and is accepted by the CRA and the taxpayer decides to go ahead without the expert advice of a tax lawyer and identifies him or herself to the CRA, there is still a possibility that the CRA finds something wrong after the fact and declares the application as invalid, leaving the taxpayer vulnerable to penalties, including criminal prosecution!
Remember, the Voluntary Disclosure Program is a program implemented and administered by the Canada Revenue Agency, whose interests lie solely with the government of Canada and whose objective it is to collect taxes on behalf of the Canadian government. They are not your friend. They will not defend or take your personal interests into account. A tax lawyer, on the other hand, is always on your side and will always defend and fight for your rights against the Canada Revenue Agency. If you are a small business owner or are self-employed and have any questions about the Voluntary Disclosure Program or any other tax issue, call or email Barrett Tax Law to book your free consultation with a tax lawyer at 1-877-8-TAX-TAX or consultations@fightthecra.ca. All consultations made to Barrett Tax Law are protected by lawyer-client privilege and are thus completely confidential, regardless of whether or not the taxpayer hires Barrett Tax Law to represent him or her.
The Canada Revenue Agency has made it clear in all of their print and online publications that any discussion that takes place between the VDP agent and the anonymous taxpayer is .informal, non-binding, and general in nature.. This means that if the VDP officer informs the anonymous taxpayer that the application would indeed qualify for entry into the program, and the applicant submits his or her identification, then there still is a chance, albeit small, that the taxpayer.s application is denied. To reduce the likelihood of this happening, the applicant should consult a tax lawyer to help ensure the application fulfills the four conditions for entry into the VDP and will thus not be denied entry upon identification of the taxpayer. If you are a small business owner or are self-employed and want to find out if you qualify for the CRA.s Voluntary Disclosure Program, call or email Barrett Tax Law to book your free consultation with a tax lawyer at 1-877-8-TAX-TAX or consultations@fightthecra.ca
One can make a disclosure to the CRA’s Voluntary Disclosure Program in two ways: 1) by way of a third-party representative, like a tax lawyer or chartered accountant, where appropriate authorization is given (via a specific CRA form) to the tax professional to act on your behalf when dealing with the VDP agent. Given the sensitive nature of the application and the complexities of the Voluntary Disclosure Program, hiring a tax lawyer is recommended for all taxpayers interested in making a disclosure to the CRA’s Voluntary Disclosure Program. If you are a small business owner or are self-employed and would like to find out if you qualify for the Voluntary Disclosure Program, call Barrett Tax Law for a free consultation with a tax lawyer at 1-877-8-TAX-TAX.
2) The taxpayer can also handle the application on his or her own. Although this is not recommended, some nevertheless prefer to deal with it him/herself). If you’ve decided to take this route, you first need to fill out and submit Form RC199, “Voluntary Disclosure Program (VDP) Taxpayer Agreement” found at the Canada Revenue Agency website:
www.cra-arc.gc.ca/E/pbg/tf/rc199/README.html
This form is used for both a no-name (or anonymous) disclosure and a named (or identified) disclosure. However, the no-name or anonymous disclosure should leave in blank any fields requesting information that would identify the applicant, specifically:
– Name
– Address
– Telephone number
– Social insurance number
– Partnership number
– Trust account number
– Business number
– License number
– GST/HST registration number or any other tax I.D. number issued by the Canada Revenue Agency to the taxpayer
The information that should be included for an anonymous or no-name disclosure is:
– The first three characters of the taxpayer’s postal code
– Taxpayer’s gender
– Taxpayer’s age
Even if you decide to handle the process on your own, it is still recommended that you consult a tax lawyer to have any questions or concerns addressed prior to starting the application process. Barrett Tax Law is pleased to offer a no obligation and confidential free consultation with a tax lawyer at 1-877-8-TAX-TAX.
In most cases, taxpayers can only participate once in the Voluntary Disclosure Program since the Canada Revenue Agency expects that taxpayers will stay compliant after having already reaped the benefits of the VDP. However, it is up to the discretion of the CRA to accept a second application if the applicant can demonstrate strong enough reasons for their non-compliance that were beyond his or her control. In this case, the second application would have to be a named or identified disclosure, and he or she would have to explicitly state that he or she had already participated or applied to the Voluntary Disclosure Program, otherwise the application may be denied if it is discovered that it was the taxpayer’s second disclosure to the VDP. It is important to note that a second application for a disclosure already made and denied due to it being incomplete will automatically be denied the second time around regardless of whether the second application is now complete.
Yes, there is a 90-day time limit to disclose your identity from the date in which Form RC199, “Voluntary Disclosure Program (VDP) Taxpayer Agreement,” is submitted to the Canada Revenue Agency. This time limit is strictly adhered to and will not be extended. Please note that if Form RC199 is not submitted but similar information that is asked in this form is provided to the Canada Revenue Agency and is signed either by the taxpayer or his or her authorized representative then the CRA will consider the start-date to be the date in which this information is provided, regardless of whether Form RC199 is later submitted.
Yes, there is a 90-day time limit that is given to the taxpayer that begins as of the Effective Date of Disclosure (EDD), the date in which the CRA receives the completed and signed Form RC199, the “Voluntary Disclosure Program (VDP) Taxpayer Agreement,” or the date that similar information contained in Form RC199 was sent in a letter to the CRA that was signed by the taxpayer or authorized representative. The taxpayer may request an extension in writing to the Assistant Director of the Enforcement Division of the Tax Services Office (TSO) for more time if it is needed.
The contact information, including mailing address, telephone number, toll-free number and fax numbers, for the Canada Revenue Agency’s Tax Services Office (TSO) in all of the provinces and territories of Canada responsible for its Voluntary Disclosure Program can be found at the CRA website at www.cra-arc.gc.ca/gncy/nvstgtns/cntcts/menu-eng.html
The Voluntary Disclosure Program agent would send a notice of denial stating that 1) the disclosure was rejected 2) the information that was disclosed may be sent to another CRA department 3) an assessment or reassessment may occur due to the disclosed information 4) interest charges and penalties may be issued and 5) an investigation and possible criminal charges may be started.
Yes, taxpayers do have the option of sending a written request to the Director of the Tax Services Office where the original decision was rendered asking him or her to examine and reconsider the decision. If there is additional information you would like to add about your specific case, then this would be the time to add the relevant information or changes that have occurred since the time the original decision was made. However, if this new information was simply information that was lacking from the first application, and the application was denied due to the incomplete nature of the application, then the CRA will not consider a petition for a second review. The director of the TSO then has the option of selecting an authorized representative of the VDP not initially involved in the making of the first decision to evaluate the decision and decide whether it should be changed.
If at this point the original decision is still upheld, then taxpayers can ask the Federal Court for a judicial review of the decision. This request must be done within thirty days from the date in which the Director of the Tax Services Office denied your request for a reconsideration of the original decision. Form 301, Notice of Application, must be filled out and submitted with the additional fee to the registrar of the Federal Court. Form 301 can be found at the following web page: http://cas-ncr-nter03.cas-satj.gc.ca/portal/page/portal/fc_cf_en/Forms
The Federal Court can also be contacted directly at the following telephone and website address: 613-992-4238 or www.cas-satj.gc.ca
It is important to note that the Federal Court will not generally override the decision made by the Canada Revenue Agency, but will instead refer the case back to the CRA if it feels that it should be given another review by the agency.
The information provided above does not constitute legal advice and should not be relied upon as such, since it has been written with a limited picture of the situation. In order to obtain proper legal advice, a lawyer must be aware of all of the details of your particular case. If in doubt, please obtain the advice of a lawyer. You may be eligible to receive a free telephone consultation with a tax lawyer at Barrett Tax Law. For details, call 1-877-8-TAX-TAX today or click here.
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