What is Tax Amnesty in Canada?

What is tax amnesty in Canada? Tax amnesty is when the government allows a taxpayer to declare income or amend a mistake on a past return and agrees to accept a defined amount, and in exchange for this disclosure agrees not to charge the taxpayer penalties or to prosecute (as in criminal) the taxpayer for tax evasion.

In Canada, tax amnesty is administered by the Canada Revenue Agency (CRA) under the Voluntary Disclosure Program, also known as VDP.

If you have filed a return in the past where you failed to declare income, declared more expenses than you were entitled to, made an error that incorrectly reduced what you owed, or are behind filing and the CRA has not requested that you file, you may qualify to apply for tax amnesty under the Voluntary Disclosure Program.

Under the Voluntary Disclosure Program, one can make a VDP application if:

1.       The income being declared is at least one year old.

2.       The income being declared would have been subject to a penalty.

3.       Disclosure must be voluntary.

4.       Disclosure must be complete.

Number 1 and 2 are pretty self-explanatory, but number 3 and 4 are where the water gets muddy. This is why, if you want to make an application for tax amnesty under the Voluntary Disclosure Program, you should do so through a professional that specializes in the field.

When the CRA says the disclosure must be voluntary, that means that the CRA must not have contacted you about ANY tax issue on ANY type of tax at all; not by phone and not by mail. If the CRA has contacted you, then your disclosure is not considered voluntary.

When the CRA says the disclosure must be complete that means that if you are making a disclosure about your 2010 return, and then there was also an issue in your 2008 return that you did not bring up or address in the VDP application, you will not qualify for tax amnesty.

The voluntary disclosure application process works as follows:

1.       A letter is sent to the CRA describing the tax disclosure that you want to make, the type of tax and the tax years in question.

2.       If based on the information in the initial letter your application is initially accepted, the CRA will reply and assign both a VDP number and a CRA VDP officer to your application.

3.       You will then have 90 days to get all of your amended or late returns prepared. This is time sensitive and MUST be done within 90 days.

4.       After 90 days and once your returns are filed, then the CRA will give you final confirmation that your VDP application for tax amnesty was approved.

If you do not qualify for tax amnesty, the route taken to solve your tax problem would be a completely different one, which is why it is important to always have your tax problem reviewed by a professional and then go from there.  Do not waste money on a program that cannot work for you.  Tax Solutions Canada has expertise in a variety of programs including VPD.

For more information about tax amnesty or if you would like to see if you qualify, please contact Tax Solutions Canada by visiting www.taxsolutionscanada.com or call 888-868-1400.