There’s nothing quite like the feeling of “I may have messed up.” What’s more, that feeling can snowball into a series of even worse decisions. Listing those potential mistakes would be pointless since there’s only one course of action that’s correct: Coming forward with the truth and doing your best to fix it.

Despite how idealistic and noble that sounds, does the CRA care at all? Actually, they do. Even if you’re not under a CRA audit, the tax authorities are willing to take it easy on people who reveal and reconcile with past filing errors. This guide will explore whether you can take advantage of this, and how to do so.

How To Correct Past Tax Filing Errors

Voluntary Disclosure and Adjustments

The Voluntary Disclosures Program (VDP) grants relief on a case-by-case basis to taxpayers and registrants who voluntarily come forward to fix errors or omissions in their tax filings before the CRA knows or contacts them about it.

You will have to pay the taxes owing, plus interest (in part or in full) that result from your corrections. However, if the CRA accepts your application, you will receive prosecution relief, and in some cases penalty relief and partial interest relief that you would have otherwise needed to pay.

Virtually any taxpayer or tax claimant can apply.

What To Do If You Can’t Meet Your Tax Obligations

Payment Plans

If you have tax debt but can’t afford to pay it, you can arrange to make smaller deposits across a time period — individuals can do this, and businesses can, too.

Set up a payment arrangement with the CRA and calculate an amount you can afford to pay regularly over time. Payment options to make a full or partial payment, either online, by mail, or in person. How and when interest is charged on unpaid amounts, and when late-filing and other penalties are applied.

Ask The CRA For An Exemption

Contact the CRA to discuss your situation, consequences of not paying, and options if you cannot pay your debt. In some circumstances, you may ask for relief from penalties and interest, and reduce the amount you owe. If you have no other financial options, you might consider insolvency or bankruptcy. Insolvency is simply the conclusive inability to pay debt. Bankruptcy is a legal process, often in court, where you ask the people you owe whether you can be freed or partially unburdened from your debts.

If you ignore your tax responsibilities and debt, or refuse to co-operate with the CRA to eliminate your debt, the CRA may take legal action. Thankfully, there’s another way to ease the stress and anxiety of taxes. Contact us today for a free consultation. You can explain your situation before we get to work sorting out your finances.

Getting Audited By The CRA: Frequently Asked Question

Can I claim tax credits I missed from years ago?

Errors aren’t always a negative thing. You can technically change your past tax returns to claim money you’ve been missing out on.

For individuals (other than a trust) and graduated rate estates, the Income Tax Act sets a three-year limitation period from the:

• end of the tax year to file an income tax return to claim a tax refund
• date of the original notice of assessment to request an adjustment to an assessment issued for a previous tax year

Examples of things you can successfully claim retroactively: Missed tax deductions or credits and salary tax deduction overpayments — as long as it wouldn’t affect another person’s tax return.

Examples of things you can’t claim retroactively: Provincial benefits, credit time limitations, and permissive deductions.

More Business And Tax Guides:

• What To Automate In Your Bookkeeping (And What Success Looks Like)
• The Punishments For Late Tax Filings As A Canadian Small Business Owner
• Tax Advisor Vs Accountant Vs Tax Consultant — Key Differences And How To Choose