If you haven't filed a return-- personal, GST, corporate or what not-- in the past , say, 5 years, then here's what you should know.

If you're a day late past the filing deadline, you get hit with an automatic 5% late filing penalty. This may not sound so bad. But, every succeeding month you don't file, another 1% is added to the penalty up to a maximum of 12 months. So, that's 17% altogether.

But, that's just for starters. 

What about the return of four years back that you haven't yet filed?

Well, the rule is that if it's the second time you're filing late, the government raises the penalty to 10% plus 2% per each additional late month! (up to a maximum of 20 months)

So, for that second unfiled return, you're now looking at a penalty of 50% of the original tax, if you're 20 months  late in filing.

(Let me thank a CA colleague of mine for pointing out that the 1% penalty per month  for  first  time offenders  has a  12 month maximum. And that the 2% penalty per month for repeat offenders has a 20 month maximum. That is, the maximum hit penalty-wise is 17% for rookie offenders  and 50% for repeaters. In the earlier version of this page, I had forgotten that.)

But, we're not finished yet. Because on top of all that, they hit you with interest on top of interest. How much interest? Don't ask. Enough to easily bankrupt you, even if you're fairly well off.

What to do?

Here's where the Voluntary Disclosure Program comes in. If you haven't yet received a notice to file, you may be able to get off the hook by following these guidelines.

Here's what what the government says:

How to make a voluntary disclosure

A person who wants to make a voluntary disclosure should contact the Canada Revenue Agency in person or writing, provide the details of the disclosure, and ensure that the  four conditions have been met. (See below for the Four conditions.)  

The person may make an interim submission.  The final and  complete submission must be filed within the period of time specified by the The Canada Revenue Agency (normally 90 days from the date of the initial disclosure.)

Each voluntary disclosure shall include enough detail to allow the facts to be verified. Clients are expected to make all books, records, documents and any other required information available upon request.

Clients are expected to pay the total of all amounts owing.  In some cases, is possible for clients make arrangements to pay these amounts.  

The identity of anyone making a voluntary disclosure will be protected according to the confidentiality provisions.  Clients representatives and agents who are unsure whether they want to make a voluntary disclosure are entitled to discuss the situation on a no-name or a hypothetical basis  with an officer responsible for handling voluntary disclosures.

Four conditions for a voluntary disclosure

1. Disclosure must be voluntary.  The client must initiate the voluntary disclosure.  Disclosure is not voluntary disclosure if it is made with the knowledge of an audit,, investigation, or other enforcement action that has been initiated by Canada Rev Agency or other authorities
   
2. CRA determines that the disclosure is  complete. Client is expected to provide all an accurate reporting of all previously inaccurate or incomplete or unreported information.  
   
3. There must be a penalty involved
   
4. Returns must be past due one year or more

Listen, you have my email and phone number. Just give me a shout if you haven't filed the past few years.

Remember, you have to act fast. If you wait till they come after you, you're no longer a valid candidate for the Voluntary Disclosures Program. Which leaves you up the creek. So,dont delay. Not even one day. Call me now.

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Copyright © 2006 B.C. Chastkofsky C.A.

Last modified: October 31, 2006