A voluntary disclosure agreement (VDA) is a contract entered into by a business with the government. The purpose is to ask the state to reduce its outstanding tax, penalties, and interest. You must pay tax if you conduct activities in your state and establish a nexus.
Classic examples of nexus-creating activities include sales meetings with customers, employees working from home, and exceeding certain sales transactions. Failure to familiarize yourself with state tax laws or neglecting your actions could result in the burden of unpaid taxes. The solution to this is a VDA.
What does the VDA process look like?
The Canada Revenue Agency (CRA) provides two ways to file a voluntary disclosure application. You can apply anonymously or declare your name. Your accountant will help you assess which of these methods favour you. However, note that the CRA is not obliged to decide in your favor.
There are also two primary Voluntary Disclosure Programs (VDP) — limited and general. If you get a favourable decision on your limited VDP application, you won’t be criminally liable and will be exempt from penalties arising from gross negligence in fulfilling taxpayer obligations.
However, you would still have to pay your tax obligations, including the interest and levied penalties. You’ll automatically fall under the general program if your circumstances aren’t limited.
How will the CRA decide on your application?
The CRA will consider different factors before approving or denying a VDP application. These may include years of non-compliance, the amount involved, and taxpayer sophistication. It can also determine whether you tried to avoid detection by using offshore vehicles or other unauthorized means.
Criteria When Hiring a Voluntary Disclosure Expert
The process of filing a VDA can be complicated for a layperson. This situation is precisely why you must work with a local voluntary disclosure expert. Here are some traits and qualifications of a trusted and reliable VDA expert.
Experience in filing VDP applications
You need someone with intensive experience in VDAs and VPD applications. You can only file a disclosure that meets the CRA’s pre-conditions. Since these pre-conditions are as complex as tax filings, it’s best to hire a Chartered Professional Accountant (CPA) who is a CRA dispute expert.
Their skills, knowledge, and experience can help ensure you have the best chance of securing amnesty and financial relief.
Comfortable to work with
Applying for tax amnesty means being honest with the person helping you with your circumstances. The reasons for failing to pay one’s tax obligations could also be nefarious or innocent. It’s hard to be truthful with someone you’re uncomfortable with.
Either way, you need someone you can trust to advocate for your rights according to the CRA-set rules. It’s best to work with a trustworthy account that will help you every step of the way.
Proactive in lobbying your interest
There will be many things at stake when your VDP application is denied. Under the limited program, the taxpayer may be criminally prosecuted if the CRA rules against their application. If your liberty is at stake, you need someone proactive in finding ways your application will prosper.
Choose the Right Companion on Your VDA Journey
There’s a 50-50 chance that the CRA will approve your VDP application. This is why you need someone reliable and trustworthy to help you secure a VDA.
Ensure you are thorough in examining your alternatives before making a selection. Consider experience, skills, and past achievements when making your choice. Only then can you confidently affirm that you entrust yourself to competent and reliable individuals.