Understanding When To File A Voluntary Disclosure

So what exactly is a voluntary disclosure? A voluntary disclosure is typically filed when a tax payer is nervous or anxious with the thoughts of having to make amends or reopen a tax file in order to file back taxes with the government. This is ideal for tax payers who know they have to pay taxes and that penalties will be assessed. Of course, this can be difficult to understand if you don’t have a tax attorney to explain it to you, which is why you should do some online research to learn more about back taxes.

Once you understand all the terms, it is then easier to complete the next steps. Here are four key conditions someone must qualify for however in order to file a voluntary disclosure with the Canada Revenue Agency (CRA).

• The voluntary disclosure needs to be just that, voluntary. This cannot be done as a response to the CRA asking for information before you file for a voluntary disclosure. If you opt in too late, you are unqualified for the program.
• The voluntary disclosure must include all information for the periods that are being adjusted, so make sure that the file is complete.
• There has to be some sort of penalty involved. So if you complete a voluntary disclosure and see that there are no taxes owed or penalties, then you do not need to file one.
• The last condition is that the voluntary disclosure must not be on recent taxes, the earliest you can file one of these is after at least a year on from the current tax season.

Penalties

The penalty of avoiding taxes can be a steep fine of up to $25,000 for every charge and this could be an annual payment for each subsequent year. Not only that, but it can also carry jail time with it as well.

However, if you’re able to complete a voluntary disclosure agreement then it may help you to avoid the many penalties and the prosecution all together. The key is to file one before the CRA has discovered the error in your taxes whether through their own individual audit or a tip. The only time limitation is that you may not file one after a ten year period.

What To Look For In A Tax Firm Firm

If you plan on filing a voluntary disclosure agreement, then it’s important to hire a tax and accounting firm who can help you through the new tax law changes.

Aim for a firm who has experience working with these types of filings and has a proven track record filing them with clients who have tax issues.

A good firm will be able to help you with any of you filing needs from unreported capital gains whether that’s from an offshore account or simply unaccounted for taxes, any under reported income, potential errors that may have appeared on previous years tax returns, any unreported foreign income that could potentially be taxed by the CRA, and finally ineligible purchases that were claimed on your tax return.

The voluntary disclosure program is a great amnesty tool for citizens to use in order to adjust mistakes that were made on previous filings and it doesn’t look to punish people severely who manage to file one. Just be sure to do your research into each firm and to file before the error is noted in CRA assessments.