Can I Make an Anonymous or No-Name Voluntary Disclosure to the CRA in Canada?

Before you hand the CRA your name and your tax history, you may want to know whether a voluntary disclosure makes sense. Many people ask whether they can test the waters without being identified.

The CRA does allow a limited version of this. This article explains what an anonymous discussion is, what it cannot do for you, and how to prepare so the next step is clear.

This article covers Canadian federal tax law, which applies in every province.

The pre-disclosure discussion

A person who is unsure about applying to the Voluntary Disclosures Program (VDP) may hold preliminary discussions with the CRA on an anonymous basis. These discussions are informal and non-binding, and can be requested through the CRA's online callback form.

In plain terms, it is a way to ask general questions, such as whether your situation could be eligible, without committing to anything. The VDP exists so a taxpayer can come forward to correct errors or omissions, such as unreported income or unfiled returns.

What an anonymous discussion cannot do

An anonymous discussion is not an application. Relief requires a signed Form RC199 with full documents and payment, and an effective date of disclosure is assigned only once the CRA acknowledges the application. Until then, nothing has been disclosed and no relief has been secured.

Protection from prosecution applies to eligible applicants for the information they disclose. It does not come from a phone call. Even with a valid application, the CRA may still audit the information provided, and if it finds fraud or misrepresentation, an assessment may cover any year.

A valid application is a full package. It is the completed, signed RC199; all returns, forms and schedules needed to correct the non-compliance; and payment, or a request for a payment arrangement, for the estimated tax owing. The VDP says it will consider fully completed applications only. You can file Form RC199 through My Account, My Business Account or Represent a Client, or by fax or mail, and you should use one submission method only.

Why timing still matters

Taking time to think is reasonable, but the facts can change while you do. A disclosure is not voluntary if an audit or investigation has been initiated against you or a related taxpayer for the disclosed information. This includes investigations by law enforcement, securities commissions or other federal or provincial regulators, not just the CRA.

Contact from the CRA can also reduce your relief. An application is generally prompted if it follows a CRA communication identifying a specific error or setting a correction deadline, or follows third-party information about your non-compliance. Unprompted applications normally get 100% penalty relief and 75% interest relief, while prompted applications normally get up to 100% penalty relief and 25% interest relief.

Keep in mind what relief does and does not cover. The VDP provides relief on penalties and interest, not on the tax itself, so tax owing must be paid. Relief is also limited by the ten-calendar-year window in subsection 220(3.1) of the Income Tax Act, so older years may get reduced or no relief.

Using a representative

If you want to keep your own name out of the early stages, a lawyer or accountant can help you think through options. When a representative submits an application for the taxpayer, both the taxpayer and the representative must sign it. The representative must be authorized on file with the CRA, or authorization documents must be included, and the name of any adviser who helped must be included. So the application itself cannot be anonymous.

Whether your situation fits is a good question for that early conversation. The CRA lists income tax situations that may be eligible, such as not reporting or under-reporting income, not reporting foreign income taxable in Canada, and not filing a return that is now a year late, and corporations can apply. Situations generally not eligible include applications that produce a refund or no tax or penalties owing, and requests for relief on penalties or interest already assessed.

What to do next

• Write down what you think went wrong: which years, which type of income or tax, and roughly how much.
• Check whether you have received any CRA letter, and note what it says.
• Confirm the basic conditions: voluntary, complete, involving interest or penalties, at least one year past the due date, and with payment or a payment arrangement request.
• Gather records. Income tax applications generally cover the most recent six years, or ten years for foreign assets or income, and clean years need not be included.
• Decide how you would pay. A payment arrangement request is allowed, but approval is not guaranteed.
• Request the callback if you want an informal discussion, or speak with a lawyer or accountant first.

If you do apply, the CRA sends an acknowledgement letter with the effective date of disclosure, and relief runs up to that date if you qualify. The CRA does not publish a processing time for VDP applications, so plan without counting on a particular timeline. How all of this applies depends on your situation, so it is worth confirming with a lawyer or accountant.

Frequently asked questions