Q: Should I make a voluntary disclosure application?

A: Failure to report income or the filing of information returns could result in significant penalties and interest.

Generally speaking, provided no enforcement action has commenced (which includes a CRA request to file a return), you should be able to file for a voluntary disclosure with CRA Form RC199. The voluntary disclosure must be voluntary and involve potential of a penalty with respect to information that is at least one year past due. Correcting inaccurate or incomplete information may apply with respect to income tax and GST/HST. You may obtain additional information by reviewing CRA Information Circular IC00-1R.

If accepted by CRA, the penalty will be waived however interest at a reduced rate will be levied if there is tax due. Once the application is accepted, you must submit the omitted information within 90 days from the date of your application.

Voluntary disclosure is advantageous when you have unfiled tax returns/ prescribed information returns or statements or have filed returns, but you omitted to report income. Information statements such as CRA Form 1135 with respect to your holding of specified foreign property is a common occurrence that could attract a maximum penalty of $2,500.

Without utilizing the above program, your only recourse to waive assessed penalties and interest is to apply for taxpayer relief with CRA Form 4288 if the assessed taxation year is within the past ten years. With this application, the conditions are very specific and success is at the discretion of CRA. You may obtain additional information by reviewing CRA Information Circular IC07-1.

You should consult with your professional advisor on all related matters.