Voluntary Disclosure (VDP) Filing Can Reduce Penalties and Interest
So it’s been a few years, you haven’t filed your returns, and now you’ve decided to get honest about it. Good for you! You’ll feel great for having gotten this off your mind. But while we always recommend filing late returns, don’t rush in blind if you owe tax. Consider taking advantage of CRA’s Voluntary Disclosures Program (VDP).
Late returns that show a balance owing trigger penalties for being late, plus interest. The Voluntary Disclosure Program (VDP) is a program under which the Canada Revenue Agency will accept late filed returns forgive the penalties and part of the interest.
Be aware there are some conditions that you have to meet to be able to be eligible for voluntary disclosure.
The return must be voluntary. That means it must be a return that the Canada Revenue Agency (CRA) has not specifically requested from you. ‘Voluntary’ in this case means that you’ve chosen to file without being told to do so.
The return must be accurate, to the best of your knowledge. It must report all taxable income from all sources without any omissions.
The return must be at least one year late.
The return must show an amount owing (not a refund). There is no penalty for late filing if you don’t owe tax, so you don’t need the VDP if your return shows a refund.
Remember that returns that have already been filed usually aren’t eligible for voluntary disclosure, so it’s best to decide ahead of time whether you’re going to file them via voluntary disclosure or not.
Is Voluntary Disclosure The Right Move For You?
Our VDP submissions are typically successful and have saved our clients thousands of dollars. To determine if it’s the right solution for you, Personal Tax Advisors can review your tax situation to determine whether the VDP is your best option.
Sunny Widerman has been preparing income tax returns for entrepreneurial Canadians and their friends since 2002. Her friendly, non-judgemental approach to tax services and advice and lively public speaking style have made her a favourite among audiences and clients alike. She has been featured by Advisor's Edge, the Canadian Media Guild, the Professional Writer's Association of Canada, the Editor's Association of Canada, CARFAC Dispatch and others.