From: AlanBaggett@volcanomail.com   
      
   Why the CRA waives penalties on many Canadians who admit they didn’t pay   
   taxes :CRA SOTW   
      
   By Erica Alini National Online Journalist, Money/Consumer  Global News    
      
   Didn't pay your taxes — for a good reason? There's a system in place to help   
   you face the Canada Revenue Agency.   
      
   Did you “forget” to pay your taxes last year?   
      
   Perhaps you really forgot — or perhaps you didn’t. But whether you made a   
   mistake or cheated the taxman, there are steps you can take to come clean and   
   avoid some of the serious consequences that would normally apply.   
      
   Under the Canada Revenue Agency’s Voluntary Disclosures Program (VDP),   
   Canadians who made mistakes in their return, didn’t file or didn’t declare   
   some of what they earned can apply for relief from penalties and prosecution.   
      
   How the VDP works   
   Paperwork   
   In order to change a tax return or submit one you never filed without getting   
   into trouble, you need to put together a VDP application — and you need to   
   do it right.   
      
   This is one of those instances where you should probably seek professional   
   help — and not from a tax accountant, but a tax lawyer.   
      
   While you can report your back taxes on your own or with the help of an   
   accountant, this “exposes you to the [CRA], who may reject your application   
   and impose penalties or commence prosecution based on the information that has   
   been provided to them,”    
   according to Canadian Tax Amnesty, a website run by Toronto-based tax law firm   
   Rotfleisch and Samulovitch.   
      
   Also, when you use an accountant, “your information will not be privileged,   
   so CRA can seize the accountant’s files and use the content against you and   
   have the accountant testify against you. If you have to go to court, the   
   accountant cannot    
   represent you and the way in which your file was handled may create problems   
   in court,” the firm noted.   
      
   Mistakes in the paperwork are a common reason why the CRA rejects VDP   
   applications, said David Rotfleisch, principal at the firm.   
      
   Don’t wait for the CRA to smoke you out   
   An application that’s been properly put together will normally be accepted,   
   said Rotfleisch, but not if the CRA already has you in its crosshairs.   
      
   “If the CRA has come to you already, you’re not eligible,” Rotfleisch   
   explained.   
      
   You still have to pay interest   
   A successful VDP application means you avoid penalties, and could potentially   
   avoid prosecution, but you generally have to pay interest on any taxes you   
   owe. Sometimes, though, the CRA will decide to reduce your interest charges as   
   well.   
      
   You only get one second chance   
   Except in very rare circumstances, you can only apply under the VDP program   
   once. After that, the CRA expects you “to keep your taxes up to date,” the   
   agency says on its website.   
      
   Why does the CRA do this?   
   As with most cases when authorities are trying to get people to do things   
   they’d rather not do — like paying taxes — it’s a good idea to have   
   both a stick and a carrot. The VDP program is the CRA’s carrot.   
      
   Voluntary disclosure options, which are common in advanced economies, are   
   “an integral part of a broader compliance strategy,” according to the   
   Organisation for Economic Co-operation and Development (OECD).   
      
   Such programs “need to be considered as part of a variety of compliance   
   actions that tax administrations and governments take in order to encourage   
   all taxpayers to meet their obligations,” says the OECD, which has   
   spearheaded efforts to crack down    
   on international tax evasion and boost co-operation among advanced economies   
   to close tax loopholes and improve information-sharing.   
      
   Also, it’s often cheaper for the government if you come forward on your own,   
   said Rotfleisch. Tax investigations are costly and tie up a lot of resources,   
   he added.   
      
   “It’s a win-win,” said Rotfleisch, for both you and for the CRA.   
      
   Who benefits?   
   Even those who’ve earned their money illegally can take advantage of the   
   VDP. Rotfleisch had his share of clients who came forward to avoid tax   
   penalties and prosecution after criminal charges were laid against them.   
      
   But the VDP isn’t just for druglords and Canadians with millions stashed   
   away in the Cayman Islands.   
      
   “Canadians from all walks of life” end up at Rotfleisch’s office.   
      
   Often, the amounts of taxes owed are relatively small, he noted.   
      
   One scenario he sees frequently is people who once forgot to file their taxes   
   by the deadline because of a dramatic life event, such as a death in the   
   family or a natural disaster that affected their home.   
      
   “Some people will remember they didn’t file taxes and send in their   
   returns shortly after the deadline,” said Rotfleisch, “but a lot of people   
   don’t.”   
      
   These people only realize their mistake when the next tax season rolls around.   
   Often, they become fearful of the CRA and again skip sending in their returns   
   for several years afterwards, getting deeper and deeper into trouble.   
      
   Sometimes people make honest mistakes, said Rotfleisch. For example, a lot of   
   seniors who live in Canada but receive pension income from the U.K. do not   
   realize that income is taxable here.   
      
   Another frequent case is that of immigrants who didn’t know they had to   
   declare money kept in a foreign bank account. Sometimes, it is their children   
   who need to take advantage of the VDP, when they discover they inherited   
   taxable assets abroad that    
   they didn’t know existed, and on which taxes should have been paid,   
   according to Rotfleisch.   
      
   And Rotfleisch expects to see an uptick in VDP applications in the next few   
   years from Canadians who will realize they should have been paying taxes on   
   their Airbnb rental or their eBay sales.   
      
   Fewer breaks for the real tax cheats?   
   Currently, the CRA reserves the same treatment for anyone who applies through   
   the VDP.   
      
   Perhaps, however, the government should be a little harder on those who   
   resorted to elaborate schemes to skirt their taxes and failed to declare   
   considerable sums. That, at least, was the recent recommendation of a   
   federally appointed committee tasked    
   with reviewing offshore compliance.   
      
      
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