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An In-Depth Understanding of Voluntary Disclosure

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Failing to pay tax returns on time is a recognized criminal offense globally. In Canada, those convicted of tax evasion could face up to five years in prison. That’s in addition to paying the total amount owed, which could climb to 200 percent of the taxes evaded. 

There are various reasons for not paying taxes. Unfortunately, the Canadian Revenue Agency (CRA) is becoming more advanced at detecting unpaid taxes. The good news is that those who couldn’t pay on time can apply for the Voluntary Disclosures Program to fix any tax errors before the CRA questions and penalizes them for it. 

Keep reading below to know more about voluntary disclosure and how it can help your case for any tax filing mistakes. 

Understanding Voluntary Disclosure

Organizations like the CRA impose strict policies on filing taxes. However, they also implement voluntary disclosures to help taxpayers correct their financial mistakes and reduce or remove their penalties. 

Governing bodies like the CRA understand that there are cases where individuals or companies fail to pay the right amount of taxes when they overlook or miscalculate what they owe. They offer a Voluntary Disclosures Program (VDP) to allow them to notify the government about their tax violations. In doing so, the CRA could ease them of jail time, but they still have to pay the tax evaded with penalties or interests. 

The Canadian Voluntary Disclosures Program has various criteria for allowing taxpayers to apply. If you’ve made the following mistake or violation, you can and should apply for the program: 

  • Failure to declare income when paid in cash
  • Miscalculating taxes
  • Deducting personal expenses from income
  • Overlooking or missing taxable amounts
  • Misunderstanding the law

Meanwhile, there are cases where an accountant makes a mistake while preparing your tax payments. In that case, it’s best to keep a close eye on their audit to watch out for any errors. 

More often than not, an individual miscalculates their taxes, especially if they choose to do it alone. Thanks to the Voluntary Disclosure Program, you can fix your violations and improve your financial status as a responsible taxpayer with the CRA. 

Tips on Getting Into the Voluntary Disclosures Program

For the CRA to consider your application for the program, your disclosure must be voluntary. That means the CRA has yet to learn about your failed payment. 

Moreover, the application must be complete with all missed filings included. Plus, all information must be at least a year overdue. 

In addition, the CRA can assess taxpayers at any time. That means they can check you for more than 20 years back. However, the VDP only provides penalty relief for violations committed not more than ten years before your application.

It would be best to seek the help of voluntary disclosure experts to ensure that you don’t miss anything when you come clean to the CRA. When you do, it’s best to be transparent so they can help you file all overlooked or forgotten tax payments. Additionally, you shouldn’t take any tax-related actions without their involvement. If you try to hide any unpaid taxes from them, the CRA could consider your partnership invalid. 

Moreover, remember that applying for the program will remove your anonymity. That means the CRA will discover you have missed tax payments and must compensate for them. So, when you apply for the program, there’s no backing out. 

Be a Responsible Taxpayer 

Paying taxes can be intimidating. However, it’s one of the most crucial social responsibilities people and businesses must go through. While there are programs like voluntary disclosure, taking good care of your taxes is best to avoid going through the whole process altogether. 

Marco Polo
Marco Polo is the admin of sparebusiness.com. He is dedicated to provide informative news about all kind of business, finance, technology, digital marketing, real estate etc.
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