Dollars and Sense: Mess Up? - Fess Up!
Wednesday, April 11, 2007 03:46 AM
So, you haven’t filed a tax return in how many years? What!?? Oh, I see, you’ve moved around a lot, the papers are buried somewhere in all those boxes in the basement or you just plain forgot and now you’re just too embarrassed to ‘fess up. If you do something, they’ll find you and put you in jail.
Or will they?
The Canada Revenue Agency (“CRA”) has something called a Voluntary Disclosures Program. Per Information Circular 00-1R, paragraph 1, their stated goal is to “…encourage(s) clients to come forward and correct deficiencies to comply with their legal obligations. It is a fairness program that is aimed at providing clients with an opportunity to correct past omissions, thus rendering themselves compliant.”
This program is applicable to taxes, duties and GST. It may be one of the ways the CRA is attempting to flush out the underground economy. Come clean and all is forgiven! However, my practice has shown the users of this program are generally, or want to be, compliant from a tax perspective. Their disclosure generally results from not being aware of our complex tax laws or from something that simply fell through the cracks.
If someone makes a valid claim under this program, they will have to pay the taxes and duties owing, plus any applicable interest. However, the CRA may provide relief from penalties and even prosecution if certain conditions are met. These are as follows:
- The disclosure must be voluntary. If you have already received requests to file from the CRA, you will probably not qualify for the program
- The disclosure must be complete. You must report all inaccurate, incomplete or unreported information.
- There is a penalty associated with the disclosure. This would a penalty incurred under, for example, the Income Tax Act (Canada) or the Excise Tax Act (GST).
- The information to be disclosed must be at least one year old or, if not, then the disclosure is not just an attempt to avoid penalties.
The Province also has some similar legislation in place for PST and other provincial taxes.
Even if you don’t meet one of the conditions above, I strongly urge you to get yourself up to date. It’s well worth the peace of mind, even if it costs you some money for interest and penalties. Engage the services of an accountant who has done this before. If the amounts are large, several years are involved or there is even a hint of criminal activity, a tax lawyer should be engaged to do the disclosure. Again, an accountant will be a good source of information in this regard.
Sheila Nelson is a Chartered Accountant and Partner at Chan Foucher LeFebvre LLP www.cflca.com
You can reach her by e-mail sheilan@cflca.com
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