The Canada Revenue Agency (CRA) has long offered a way for taxpayers to correct past filing mistakes: the Voluntary Disclosures Program (VDP). The VDP lets eligible taxpayers come forward to correct errors or omissions on previous returns and, if accepted, receive relief from penalties and a portion of the interest charged. Importantly, successful disclosures are considered for relief from criminal prosecution, though acceptance is determined case by case.
Tax owing remains payable, but the CRA gives greater relief to those who come forward before being contacted. In short, taxpayers who disclose voluntarily, before any CRA contact, generally receive more favourable treatment than those who apply after being prompted by the CRA or another authority.
How to qualify for the VDP
To be eligible for the Voluntary Disclosures Program, a disclosure must meet five core conditions. The disclosure must:
- Be voluntary — initiated by the taxpayer or their authorized representative, not by CRA or another authority;
- Relate to a tax year or reporting period that is at least one year past its due date;
- Involve amounts that would normally attract penalties or interest;
- Include all known errors or omissions for the periods disclosed;
- Include payment of tax owing or a request for a payment arrangement to address any outstanding balance.
Recent changes to the VDP
New guidelines that came into effect on October 1, 2025, broaden and simplify the VDP for several tax types, including income tax, sales tax, withholding tax, excise duties and other federal taxes. One practical change is a streamlined application form: Form RC199, Voluntary Disclosures Program (VDP) Application, which can be completed by the taxpayer or an authorized representative. The form asks for a concise explanation of the facts surrounding the omission or inaccuracy.
The application must also address how any tax owing will be handled — either by submitting payment or by requesting a payment arrangement for discussion with a CRA collections officer. Another important change expands eligibility in some situations: disclosures prompted by a CRA communication about potential non-compliance may still be accepted, which is a departure from past practice. This means that certain educational or advisory letters from the CRA about ineligible deductions or unreported income may not automatically disqualify a disclosure from VDP consideration.
What are the relief provisions?
The VDP offers two tiers of relief depending on the circumstances of the disclosure:
- General relief. For truly voluntary disclosures made before CRA contact, the CRA may waive all applicable penalties and apply a 75% reduction of the interest charged on the balance owing.
- Partial relief. If a disclosure is prompted by a CRA communication, taxpayers may still receive a full waiver of penalties, but only 25% of the interest will be waived when the application follows CRA contact.
What to do if you have made a tax filing mistake
If you discover unreported income, overstated deductions, missed elections, or other filing errors, it is generally advisable to address them promptly. Making a voluntary disclosure can limit interest charges and reduce the stress associated with unresolved tax issues.
To prepare a VDP application, gather documentation that explains the error and supports the corrected amounts. Complete Form RC199 fully and honestly, include any payment or request a payment arrangement if you cannot pay immediately, and disclose all related periods and amounts. Keep clear records and copies of your submission.
Although an individual can file a VDP application without professional help, many taxpayers find it beneficial to consult a tax professional or authorized representative. An experienced advisor can help ensure the disclosure meets VDP criteria, that all relevant periods and issues are disclosed, and that supporting documentation is organized. Professional advice can also help with negotiating payment arrangements when needed.
Filing an unprompted disclosure can lead to significantly greater relief from interest and penalties and provides certainty that you have addressed the matter proactively. If you receive any CRA communication regarding potential non-compliance, consider taking prompt action to assess whether a disclosure is appropriate under the updated VDP rules.
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