Voluntary Disclosures: Coming Clean with the CRA – A Complete Guide by a Montreal CPA Firm Near You

Introduction

The CRA’s Voluntary Disclosures Program (VDP) allows taxpayers to correct past tax errors before CRA discovers them. If approved, the VDP can eliminate penalties, reduce interest, and prevent prosecution for issues such as unreported income, missed foreign asset reporting, GST/HST errors, payroll omissions, and incorrect filings. This program is often the difference between resolving a tax problem safely or facing severe consequences. Whether you are an individual, a business owner, a landlord, a gig worker, or a corporation, understanding how the VDP works is essential before approaching CRA.

Legal and Regulatory Framework

The VDP operates under CRA administrative policy rather than legislation, but it is supported by the Income Tax Act, Tax Administration Act (Québec), and Excise Tax Act. A valid disclosure must meet five criteria: it must be voluntary (submitted before CRA contacts you), complete (full disclosure of all errors), involve a penalty or potential penalty, include information older than one year, and include payment of the estimated tax owing. CRA provides two streams: the General Program, offering penalty relief and partial interest relief, and the Limited Program, offering reduced benefits for intentional or large-scale non-compliance. GST/HST disclosures follow similar requirements under the Excise Tax Act.

Key Court Decisions

In Guindon v. Canada, the Supreme Court confirmed that CRA penalties may be severe, reinforcing the value of voluntary disclosure before CRA discovers errors. In Roofmart Ontario Inc. v. Canada, the court emphasized that delays or incomplete disclosures undermine VDP validity. In Taylor v. Canada, the Tax Court reiterated that CRA must follow fairness but has wide discretion in accepting or rejecting VDP applications. In McNally v. Canada, the court upheld CRA’s right to deny relief when the taxpayer attempted to disclose after receiving audit warnings. These cases reinforce the importance of filing a proper and timely disclosure.

Why the VDP Matters

The VDP protects taxpayers from financial and legal consequences such as gross negligence penalties (50% of understated tax), repeated failure-to-report penalties, late-filing penalties, interest accumulation, GST/HST interest, payroll penalties, and criminal prosecution. For many taxpayers, especially those with years of unreported income, offshore accounts, rental underreporting, crypto gains, or bookkeeping errors, the VDP offers a safe path to compliance without punitive consequences.

Common Situations Where VDP Applies

1. Unreported Income

Including employment income, contractor income, gig income, rental income, crypto gains, investment income, or foreign income.

2. Incorrect or Missing GST/HST Filings

Unreported sales, incorrect ITCs, missed returns, or unregistered businesses exceeding $30,000.

3. Payroll Errors

Failure to remit source deductions, unreported taxable benefits, or misclassified workers.

4. Foreign Reporting Non-Compliance

Unfiled T1135 forms, offshore assets, or foreign trust investments.

5. Bookkeeping Errors or Neglected Tax Returns

Unfiled returns, incorrect deductions, or years of underreported revenue.

How to Make a Successful Voluntary Disclosure

1. Do Not Contact CRA Before Preparing the File

Once CRA contacts you—even with a review letter—you no longer qualify for the VDP. This is why representation is essential.

2. Prepare a Complete and Accurate Disclosure

A valid disclosure requires: full explanation of errors, all unreported income, corrected returns, supporting documents, and estimated payment.

3. Submit the Application

This may include Form RC199 (Income Tax VDP) or the GST/HST voluntary disclosure equivalent, along with corrected filings.

4. Pay the Estimated Tax Owing

The VDP requires payment or arrangement of payment for tax and partial interest.

5. Cooperate Fully With CRA After Submission

CRA may ask for further documentation or clarification. Full cooperation is required for approval.

Mackisen Strategy

At Mackisen CPA Montreal, we prepare fully compliant VDP applications that maximize relief. Our process includes analyzing years of tax history, identifying hidden liabilities, reconstructing income and expenses, preparing corrected filings, drafting complete disclosure narratives, calculating tax and interest, submitting the VDP application, negotiating payment arrangements, and communicating with CRA on your behalf. Our strategic approach ensures your disclosure qualifies as “voluntary,” “complete,” and meets every legal criterion.

Real Client Experience

A self-employed consultant who failed to report income for four years avoided gross negligence penalties through a successful VDP. A landlord with unreported rental income for three properties corrected six years of filings with minimal interest. A crypto investor who did not report gains for multiple years resolved tax exposure safely through a full disclosure. A corporation that failed to remit GST/HST for two years avoided prosecution by voluntarily correcting filings.

Common Questions

Will CRA accept my disclosure? If voluntary, complete, and penalty-related, it is likely. Can CRA reject a VDP? Yes—if CRA already contacted you or if disclosure is incomplete. Does the VDP eliminate all interest? No—partial relief only. Is the VDP anonymous? Preliminary discussions can be anonymous, but the final application is not.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal handles complex VDP applications with precision and confidentiality. Whether the issue involves unreported income, crypto, foreign assets, GST/HST, payroll, or rental errors, we protect you with expert strategy, full documentation, and complete discretion.