Can I Use the VDP to Fix Unfiled Payroll Source Deductions or Remittances in Canada?
This answer covers Canadian federal tax law, which applies in every province.
It may. The CRA lists not remitting employee source deductions, such as CPP and EI, among the income tax situations that could be eligible for the Voluntary Disclosures Program (VDP). If your application is accepted, the CRA may give penalty and interest relief, but VDP relief covers penalties and interest, not the tax itself.
Payment is a condition, so you must include payment of the estimated tax owing or a request for a payment arrangement. Approval of an arrangement is not guaranteed, and collections officials review each request. The application must also be voluntary and complete, involve interest, penalties or both, and include information at least one year past the filing due date.
Unprompted applications normally receive 100% penalty relief and 75% interest relief, while prompted applications normally receive 25% interest relief and up to 100% penalty relief. An application is generally unprompted if the CRA has not communicated with you about the compliance issue, or if the only contact was a general education letter. A disclosure is not voluntary if an audit or investigation has been initiated for the disclosed information. How specific payroll penalties are treated is worth confirming with a lawyer or accountant.
Key takeaways
- The CRA lists not remitting employee source deductions, such as CPP and EI, as a situation that may be eligible for the Voluntary Disclosures Program.
- VDP relief covers penalties and interest, not the tax, so the tax owing must be paid.
- Payment of the estimated tax owing, or a request for a payment arrangement, is a condition of a valid application, and approval of an arrangement is not guaranteed.
- A disclosure is not voluntary if an audit or investigation has been initiated for the disclosed information.