Tax disclosure is a consequential responsibility that businesses and individuals must carry out. Failure to do so is a globally recognized criminal violation. In Canada, the conviction for tax evasion goes up to five years in prison on top of paying a significant penalty fee.
Filing taxes takes a lot of work. Unfortunately, it’s become such a challenging duty that others fail to do so in time. However, filing late is better than not filing at all. The Canada Revenue Agency (CRA) offers chances for those who can’t pay their taxes on time through the Voluntary Disclosure Agreement (VDA).
The VDA is a formal accord between a business or individual and a regulatory entity, typically a tax authority. It’s where the disclosing party reports undisclosed tax obligations, enabling them to rectify their violation, mitigate penalties, and maintain compliance with tax regulations.
Navigating the VDA can be complex for taxpayers, but it’s essential for those filing late. Read below for helpful tips during the VDA process to ensure a successful outcome.
Work with a Professional
The best thing to do when going through a VDA is to partner with a professional. Voluntary disclosure experts like Faris CPA possess the specialized knowledge and expertise taxpayers need to navigate the VDA process confidently.
Professionals know the regulations surrounding VDA. By working with them, you can understand the severity of your violation and the steps you need to take to mitigate your penalties.
Moreover, working with a professional also provides a long-term financial benefit to a taxpayer. Businesses and individuals can maintain tax compliance and minimize potential liabilities with assistance.
Stay Transparent During the Process
Transparency is fundamental during the whole VDA process. Being open with your professional partner will be advantageous for your tax records. It can help them make a compelling case that will help reduce your penalties and comply with tax regulations.
Provide accurate or complete information to make your agreement valid. When that happens, you increase your risk of legal liabilities and negative public perception.
Furthermore, willingly disclosing helpful information helps establish a cooperative relationship with tax authorities. Doing so will lead to potential leniency and diminished penalties while resolving your issues.
Lastly, there are cases where tax authorities cancel or waive their imposed penalties or interest on a business or individual. These occur if taxpayers encounter circumstances beyond their control. Providing all the essential details will help you qualify for such a favorable solution.
Avoid Doing Anything
Only do something with a professional’s involvement, especially during the VDA process. These actions include filing a return, registering for tax, ignoring notices, or responding to them. Taking any steps mentioned without an accountant knowing could jeopardize your case with tax authorities.
The key to an effective VDA is aligning with your accountant’s strategy. They know what’s best for your case. Doing an action that goes beyond their advice could invalidate your VDA, regardless if any unmonitored initiative is big or small.
Trust the Professionals
The VDA will help taxpayers address past discrepancies regarding their records. However, it’s a meticulous process that requires careful planning, transparency, and trust in professionals.
Trusting professionals during the VDA process will help you achieve valuable guidance, minimize risks and penalties, and ensure you’re fully tax compliant. Plus, they can help you remain compliant for years to come.
