I made a mistake on my tax return. What do I do?

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Mistakes happen, even on tax returns!

If you’ve filed your tax return timely, you can request the Canada Revenue Agency (CRA) amend and reassess the return to include the income omitted or deductions missed. The request should be made in writing to the CRA.

For circumstances where the omission or mistake would result in a penalty (CRA) created a voluntary disclosure program (VDP).  The VDP offers taxpayers a chance to correct errors on a previously filed tax return, or to file a return which should have been filed but was not.

The VDP provides  two streams, one for income tax disclosures and one for GST matters. Tax professionals should always be contacted first when using the VDP.

1. Income tax stream

Income tax applications to the VDP are processed under “two tracks”: (1) the general program and (2) the limited program. Each case is assessed individually as to which track will apply.

General program

This program provides relief to taxpayers who intend to correct unintentional errors. If an application is accepted into this program, the taxpayer, will not be subject to any penalties, nor referred for criminal prosecution. The taxpayer may also be granted partial relief of interest for assessment for a certain number of years.

Limited program

This program limits the relief available for taxpayers who intentionally avoided their obligation to pay taxes. If a taxpayer is accepted to this program, they will not be referred for criminal prosecution, or charged gross negligence penalties, but may be charged other penalties as applicable. No interest relief will be provided.

CRA considers the following factors in determining acceptance into the limited program:

  • Efforts were made to avoid detection through the use of offshore vehicles
  • The dollar amounts involved
  • The number of years of non-compliance
  • The sophistication of the taxpayer

The existence of one or more factors does not automatically make the taxpayer ineligible or eligible for the limited program.

2.GST/HST stream

Registrants and other taxpayers required to report GST/HST, apply to this stream of the VDP. This program provides taxpayers the opportunity to voluntarily correct inaccurate or incomplete GST information, or disclose any information that should have been reported initially but was not.

Applications under this stream of the VDP are processed under three categories: (1) the wash transactions program, where one party may have reported and another has not; (2) the general program; and (3) the limited program, similar to the income tax limited program. The determination of which category the application will be processed is based on a case-by-case assessment

Executors and Powers of Attorney

If you are acting under a Power of Attorney or as an executor and notice that taxes have not been reported properly, you can apply on behalf of the grantor or deceased to the CRA’s VDP.

For further information, or assistance with voluntary disclosure, please consult a TEP.

Disclaimer

An article of this kind can never provide a complete guide to the law in these areas, which may be subject to change from time to time. The opinions and suggestions made within this article should not be interpreted as specific advice in relation to any particular individual or individuals. Neither STEP, the article author or their firm accept responsibility for any loss occasioned by someone acting or refraining to act on the basis of the opinions and suggestions contained in this article. More