One of the ways for a taxpayer to become
compliant with something that was amiss in the prior period(s) is the voluntary
disclosure program. It allows the taxpayer to file the additional documentation
required without the application of penalties. The tax liability and interest
will still apply however potentially onerous penalties are avoided. The
voluntary disclosure is an all-in kind of program where the taxpayer discloses
the information and leaves it up to the Minister’s discretion to waive the
penalties.
Common situations when a voluntary
disclosure may be required:
-Failing to file T1135 form to disclose
foreign investments over $100,000
-Failing to report a capital gain on
sale of investments or real estate
-Failing to report income from offshore
investments
What happens if the submission is not
eligible?
The taxpayer handed over the
documentation to assess the additional tax and for whatever reason is not
eligible for relief. In that case, the taxpayer has handed over the loaded gun
to the agency in whose capacity it is to apply tax, interest and penalties as
well as begin collection efforts upon completion of the assessment. When
applying under this program the taxpayer either has to be really certain that
he or she qualifies or they could pursue a no-name disclosure.
A no-name disclosure does not
specifically identify the taxpayer but still identifies the situation. It is
basically a question asked of the Minister “if someone were to be in this
situation and provided this documentation, would they be eligible to apply for
the program”. The response would be limited to the facts disclosed. If there
were additional information that was not provided in the no-name disclosure
then the Minister is not bound by its original answer and could change its
decision. There is also a time limit (90 days from the day of the mailing of
the response) to submit the full disclosure if the taxpayer wishes to rely on
the response provided. There are some facts required to be identified about the
taxpayer so that if the voluntary disclosure is pursued, the response to the
no-name disclosure could be matched with the subsequent submission of the full
disclosure.
Overall a no-name disclosure is a good
way to test the waters to ensure that once all of the information is provided,
the taxpayer is eligible for the waiver of penalties.
