Tax issues have a way of sneaking people. An unanswered return here, a late payment there, and suddenly you face sanctions, interest or even legal consequences. Two of the most common tools that Canadians can use to clean up or ease the pressure are Provisions on the delay of taxpayers and the Voluntary Disclosures (VDP) program.
One of the first things a Tax writings Will explain clients in tax problems is that understanding the difference between these two options can save you time, money and a whole lot of stress. They both deal with tax problems, can be extremely helpful and offer a kind of easing – but they solve completely different kinds of problems.
What is the taxpayer’s exemption?
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These provisions are for people who are affected by interest and sanctions, but have a legitimate reason to submit or pay their taxes late. They do not delete your tax debt or dry the slate clean, but they can reduce or cancel the extra costs stacked according to the fact. These are situations where someone has become ill, experienced a natural disaster or undergoing a serious financial difficulty that made it impossible to comply with deadlines. CRA recognizes that life sometimes gets in the way – and that’s what this program is for.
You are still on the hook for the guilty treasure. But if your case fits CRA’s criteria, you can ask for a reduction or cancellation of interest and sanctions dating back to ten years. This is a formal request – you submit a Form RC4288Explain your circumstances and specify supportive documents.
What is the program Voluntary Disclosures?
VDP is a way to get clean if you made mistakes or left things on previous tax archives. Unlike taxpayers’ relief, this program focuses on the original tax archives themselves – not just the sanctions and interest.
If you forgot to report foreign income, did not fil for a return at all or claimed expenses you should not have, you must apply through VDP before CRA contacts you about it and if you qualify, you can avoid prosecution and get partial relief from sanctions.
It is designed to encourage people to resolve previous errors voluntarily. The key word that is “volunteer.” When CRA starts a revision or investigation, it’s too late.
A valid VDP application must be complete, voluntary and involving a penalty. You will also have to pay the guilty tax (or arrange), but avoiding criminal fees or sanctions from gross negligence is a huge victory in serious cases.
Last thoughts
Both programs are there to help, but they are not guaranteed. You must apply correctly, provide detailed information and make your case. Even if you think your situation is less, the consequences of ignoring that snowball can quickly. Given the significant swings in potential financial results, it is a smart investment that probably saves you money.