Many taxpayers view their annual filing as a stressful exercise and feel great relief when the job is done.
Some people chose to avoid the task.
The Canada Revenue Agency says, 10 to 15 percent are non-filers based on the country’s total population. That amounts to a substantial number of people.
It includes some in the farming community, who opted out of filing a personal income tax return for a variety of reasons including the belief that filing wasn’t required because they expected a refund and didn’t owe taxes.
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But there are more good reasons to file than you might think.
- If you are due a refund you should collect it. Otherwise the government continues to use your money.
- If your income is low enough you might have access to social programs and tax credits you may be missing out on.
- The CRA can go back and request returns from previous years and automatically apply interest and penalties to returns that have a balance owing.
- In some cases, the CRA has arbitrarily assessed taxpayers for revenue while ignoring expense items that would reduce their taxes. They then place the onus on the taxpayer to prove expenses.
If you passed on this or previous years’ filing, there is something you can do to avoid the full impact of CRA actions.
The CRA operates a Voluntary Disclosures Program (VDP) to encourage taxpayers who have not reported income tax or GST/HST to come forward and clear their affairs.
A person who volunteers to disclose income tax or GST/HST owing will not have penalties imposed by CRA for non-reporting for a period of 10 years prior to their VDP application.
However, they must pay the tax owing and the interest, with some exceptions.
A disclosure is only considered voluntary if it is complete and not triggered by a CRA audit or enforcement action.
In the normal course, a taxpayer who has not filed at all would be required to file for seven years, including the current year.
A taxpayer who has filed but failed to fully disclose is required to file for years that are otherwise closed for changes or adjustments.
A disclosure can be made on a “no-name” or anonymous basis by a representative.
Once all the details are agreed on, including how much tax and interest is payable, only then does the taxpayer’s name need be disclosed within 90 days of effective date of the disclosure.
Full payment or an acceptable arrangement will need to be made at the time of disclosure.
For GST disclosure, full payment must be made or interest will apply.
If you’re caught in this predicament, we suggest you seek the assistance of an accounting or tax specialist to work with CRA on your behalf to help resolve the matter.
