Some Canadian taxpayers could find it easier to get “financial relief” and avoid the risks of an audit during tax season with new changes coming to the Canada Revenue Agency, starting Oct 1.
These changes come as the CRA faces heavy scrutiny from the federal government, with Finance and National Revenue Minister François-Philippe Champagne giving the agency 100 days to “strengthen services, improve access, and reduce delays.”
The CRA says new updates to its Voluntary Disclosures Program (VDP) will make it more accessible and easier for individuals to correct issues in the filing process, as well as expanded eligibility and incentives for participating.
If tax filing is done on time and accurately, that also increases the likelihood that an individual will get the maximum tax refund they are entitled to.
“The new policy is written in plain language that makes it easier for taxpayers to understand,” the CRA said in an emailed release.
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“Due to the transition from paper to electronic, the application process and form will be simplified. Now, it will be easier than ever to submit an application.”
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According to the CRA, the VDP offers “some financial relief” for taxpayers on a case-by-case basis who come forward to declare errors or missing information in their tax filings before the CRA knows or contacts them about it.
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“I think that they (the CRA) were criticized because the (VDP) program was too restrictive historically and based on their research, they want to reduce those barriers,” says Ryan Minor, director of tax at Chartered Professional Accountants Canada.
“The enforcement costs are quite high to audit, so the more folks come forward to correct their affairs, the less cost they (the CRA) have to incur to track them down and audit them. So the math makes sense from an economic point of view to offer these kind of programs.”
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One of the changes the CRA highlights is expanding eligibility to include those tax filers who may have received an “education letter,” which informs individuals about common non-compliance issues they may come across, like claiming expenses that are ineligible.
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In addition, the CRA said in its release that it is updating its “financial relief” by offering two distinct categories for those who participate in the voluntary program.
The first category is called “Unprompted,” for those who submit before an educational letter about potential non-compliance is sent, while “Prompted” applications are those sent after receiving such communications.
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The amount of financial relief offered by the CRA varies depending on which category the taxpayer falls under. This may include a reduction in interest and penalties on late filings and payments.
If the filer submits their application as “Unprompted,” they may qualify for higher interest relief of 75 per cent in addition to 100 per cent penalty relief.
For those classified as “Prompted,” meaning they received an educational letter, the relief on interest falls to 25 per cent and penalty relief that may be less than 100 per cent.
“They’re saying, ‘You have an incentive to come forward before we come after you.’ That’s why it’s more generous,” Minor says.
“So, if you were a non-compliant individual and they’ve never contacted you, the sort of arithmetic is that ‘I’m far better off coming forward now than waiting than if they contact me.’”
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The CRA notes that taxpayers who are under audit or investigation, or who are “egregiously or intentionally non-compliant,” may not be eligible for the VDP program.
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