If you’re trying to solve a CRA balance problem – missing payments, credits in the wrong period, interest that won’t stop, or collection pressure – an online “balance screen” usually isn’t enough.

What you need is a detailed Statement of Account: the CRA’s transaction-by-transaction ledger showing what was posted, when it was posted, and where it was applied (by period). And yes—there’s a right way to request it so you actually receive something useful.

This guide covers:

• what “detailed” means
  
• how to request statements online vs. by written request
  
• what to do when older years don’t show up online

1. What counts as a “detailed” CRA Statement of Account?

CRA uses a few similar terms that people mix up:

A) Online “Account balance / transactions” view

Useful for quick checks, but it may not show every period you need – and CRA confirms this online info is not necessarily “official documentation.”

B) A detailed statement of account (issued on request)

CRA describes this as showing amounts posted and charged for a particular reporting and/or non‑reporting period, including things like (re)assessments and transfers, and providing balances by period.

2. When you should order a detailed statement (instead of guessing)

You may consider ordering a detailed statement of account if any of these are true:

• your bank shows payments, but CRA doesn’t (or they appear late
  
• credits are sitting in the wrong “Period End” (common in GST/HST and payroll)
  
• you suspect CRA applied a payment to the wrong account or period
  
• the online portal doesn’t display the older years you need
  
• you’re preparing a taxpayer relief request and need a clean ledger trail (interest/penalty chronology)

3. What to include in your request

Whether you submit an online enquiry or a written request, include:

1. Who you are
   

• legal name + contact details
  
• SIN (individual) or BN (business)
  

2. Which account(s): For businesses: specify program account(s) – these may include
   

• GST/HST (RT)
  
• Payroll (RP)
  
• Corporate tax (RC)
  

3. The exact time period: Example: “Jan 1, 2021 to Dec 31, 2024
   
4. What you want: Ask for a detailed Statement of Account showing:
   

• all assessments/reassessments
  
• all payments received
  
• all transfers in/out
  
• all interest and penalties posted
  
• balances by period

4. After you receive the detailed statement: what to do next

1. Match every payment to your bank transactions (date, amount).
   
2. Check allocation by period/accounts (this is where errors frequently hide).
   
3. Identify whether the problem is:
   

• missing posting,
  
• wrong period,
  
• wrong program account, or
  
• interest continuing because the “right” debt wasn’t reduced.
  

4. If a correction/transfer is required, request a correction from the CRA.

Bottom line

A detailed CRA Statement of Account is the document that lets you stop arguing about the balance and start proving what happened – by period and by transaction.

Contact us today to chat with our tax lawyers in Toronto.

An RRSP over-contribution is one of those mistakes that feels small but can become expensive fast – because the CRA’s penalty tax runs monthly and can keep running until the excess is eliminated.

This guide walks you through:

• What the CRA considers an “excess contribution”
  
• How the 1% per month tax is calculated and when it stops
  
• The exact forms that usually matter
  
• A practical, step-by-step plan to fix the issue and minimize total cost
  
• The most common pitfalls that cause people to pay more than they should

1. What Counts as an RRSP Over-Contribution (CRA Definition)

You generally have RRSP “excess contributions” when your unused contributions from prior years + current calendar-year contributions exceed your RRSP deduction limit (shown on your latest Notice of Assessment/Reassessment or in CRA My Account) plus the $2,000 buffer.

Importantly: Over-contribution issues usually arise from contributions, not deductions. You can choose to deduct RRSP contributions later, but the CRA’s excess-contribution calculation focuses on whether you contributed beyond your available limit (subject to the buffer).

2. The Real Cost: How the CRA’s 1% Monthly Tax Works

If your unused contributions exceed your RRSP deduction limit by more than $2,000, you generally must pay 1% per month on the portion that exceeds the buffer.

3. RRSP Over-Contribution Triage: What To Do Immediately

When you discover (or suspect) an RRSP over-contribution, speed matters – but so does not making a second mistake while “fixing” the first.

Step 1: Stop new contributions

Pause automatic deposits, contributions you can control until you’ve confirmed your numbers.

Step 2: Confirm your RRSP deduction limit (don’t guess)

Use your latest Notice of Assessment/Reassessment or CRA My Account to find your RRSP deduction limit and your unused RRSP contributions figure.

Step 3: Calculate the excess month-by-month

The CRA’s Part X.1 tax is monthly, so the best outcome often depends on:

• Which month the excess first existed, and
  
• Which month you eliminated it.

Step 4: Decide how you’ll eliminate the excess

Most cases come down to one of these paths:

1. Withdraw the excess (fastest way to stop the monthly tax), or
   
2. Absorb it with new RRSP room (only makes sense in narrow situations – and only after doing the math).

4. How To Remove the Excess: The Withdrawal Options (and Their Tax Traps)

Withdrawing the excess stops the 1% monthly tax once the excess is gone – but withdrawals can create withholding tax and income inclusion issues. There are several options for withdrawing excess contributions, including the following:

Option A — Withdraw the excess now (with withholding tax)

If you withdraw from an RRSP, the financial institution generally withholds tax at source. CRA’s published rates for Canadian residents are:

• 10% (5% in Quebec) up to $5,000
  
• 20% (10% in Quebec) over $5,000 up to $15,000
  
• 30% (15% in Quebec) over $15,000.
  

Key point: Withholding tax is not necessarily the final tax you’ll owe – it’s a prepayment. You may end up owing more tax than the amount that was withheld.

Option B — Withdraw the unused contributions without withholding (T3012A route)

If you meet CRA’s conditions, you can apply to withdraw unused contributions without withholding tax by using Form T3012A (CRA’s approval required).

5. The “You Must File This” Piece: T1-OVP / T1-OVP-S

If your excess contributions are subject to the 1% tax, there is a special return that must be filed – Form T1-OVP. Generally, the return needs to be filed and tax paid no later than 90 days after the end of the year in which you had the excess contributions. Filing Form T1-OVP return late could result in late filing penalties and repeat late filing penalties.

6. Can CRA Waive or Cancel the RRSP Excess Contribution Tax Itself?

Generally, you can ask in writing for the CRA to waive or cancel the RRSP excess contribution tax if both of the following are true:

1. The excess arose due to a reasonable error, and
   
2. You have taken reasonable steps to eliminate the excess

The form CRA wants for this: RC2503

To make the request, you may wish to use Form RC2503 to request a waiver/cancellation request, along with supporting documents showing the exact months of contributions/withdrawals and documents supporting your “reasonable error” narrative.

Practical takeaway: “Reasonable error” is not just saying “I didn’t know.” A strong RC2503 package usually explains:

• What specifically caused the error (timeline + trigger)
  
• Why that mistake was reasonable in the circumstances
  
• What you did immediately once you discovered it
  
• How you eliminated (or are eliminating) the excess
  
• Clear month-by-month supporting documents

7. When RC4288 Matters: Relief From Penalties and Interest (Not the Part X.1 Tax)

RRSP over-contribution files usually have two problems:

1. The Part X.1 tax (the 1% per month), and
   
2. Penalties/interest caused by late filing or delayed payment.

CRA’s taxpayer relief process (often via Form RC4288) is aimed at penalties and interest relief. RC4288 is not the main tool to cancel the over-contribution tax itself – that’s where RC2503 typically comes in.

8. If CRA Assessed You Incorrectly: Don’t Use “Relief” To Fix a Math Problem

If the CRA’s assessment is wrong because of:

• Incorrect months assigned,
  
• Misapplied deduction limit data, or
  
• Other factual/technical errors,

you may need a formal Notice of Objection, and not request discretionary relief. You generally have 90 days from the date of a Notice of Assessment or Reassessment to file a Notice of Objection. This matters because “relief” requests are discretionary and often assume the assessment is correct; Notices of Objection are generally for when the assessment is incorrect.

9. Common Reasons RRSP Over-Contribution Fixes Fail

Based on CRA’s published requirements and common patterns, these are the pitfalls that cause unnecessary cost:

• Waiting too long to act to withdraw the overcontribution
  
• Submitting a waiver/cancellation request that is vague and that does not clearly outline how the requirements are met
  
• Using taxpayer relief (RC4288) to try to cancel the underlying tax

10. Prevention: How To Avoid RRSP Over-Contributions Going Forward

A few habits prevent most RRSP over-contribution problems:

• Check your RRSP deduction limit on your Notice of Assessment (or CRA My Account) before making large contributions.
  
• Track all RRSP-type contributions you’re responsible for (including spousal contributions and any “automatic” deposits).

11. When Professional Help Becomes High-Value

You may wish to consider getting assistance from a tax lawyer if any of the following apply:

• The amount of over-contribution tax, interest, and penalties is significant
• CRA’s record of months during which the penalty tax applies differs from yours
• You have already requested a waiver/cancellation of overcontribution tax or interest/penalty relief, but were not successful

If you still think cryptocurrency is “invisible” to the Canada Revenue Agency (CRA), you’re operating on an outdated assumption. Between (1) exchange KYC data, (2) court-ordered disclosure powers, (3) banking and payment trails, (4) international information sharing, and (5) increasingly sophisticated blockchain analytics, the CRA has multiple practical paths to identify Canadians whose crypto activity doesn’t match their tax filings. The CRA is actively using these resources: a Canadian Press report published December 7, 2025 describes a CRA “cryptoasset auditors” team working on 230+ files and generating over $100 million in taxes from crypto-related audits over the prior three years.

This guide walks you through:

• How the CRA actually finds crypto users
  
• What “unnamed persons requirements” mean (and why they matter)
  
• What records the CRA expects you to have
  
• What to do if you’ve already missed crypto reporting

1. The Core Idea: Crypto Is Often “Pseudonymous,” Not “Anonymous”

Most blockchains are public ledgers. Wallet addresses don’t show your name, but they do show:

• inflows and outflows,
  
• timing,
  
• counterparties,
  
• patterns (including “layering” behavior).

Once a wallet touches a regulated chokepoint (a centralized exchange, a crypto ATM operator, a payment processor, a bank-funded on-ramp, etc.), it becomes much easier to associate on-chain activity with a real person.

That’s why enforcement today focuses less on “cracking crypto” and more on linking identities to addresses and transaction histories – often through third parties and data.

2. Why Tracking Matters: The CRA Treats Crypto Transactions as Tax-Relevant Events

You don’t need to be a “crypto business” to create tax consequences.

In Canada, crypto gains can be treated as capital gains or business income depending on your facts.

Common events that can trigger reporting issues include:

• selling crypto,
  
• swapping one coin for another,
  
• using crypto to buy something,
  
• earning crypto (mining, staking, some DeFi yields),

3. The 7 Ways the CRA Tracks Cryptocurrency in the Real World

3.1 Exchange KYC + Trading Ledgers (The Biggest “Chokepoint”)

If you’ve used a centralized exchange that collects identity information, you’ve interacted with a data-rich environment.

In one Federal Court case, the court authorized the CRA to issue an “unnamed persons requirement” to obtain information and documentation about certain Coinsquare users. The described categories included thresholds like $20,000 account value, $20,000 cumulative deposits, and high-volume accounts across 2014 – 2020.

Disclosure demanded by the CRA can include things like:

• “know-your-customer” (KYC) reports,
  
• deposit addresses,
  
• deposits/withdrawals (crypto and fiat currency),
  
• funding methods,
  
• timestamps and captured transfer data.

In other words, if your exchange knows who you are, and the CRA lawfully compels that exchange to disclose, the CRA can map your identity to activity.

3.2 Bank Trails and Fiat On/Off‑Ramps (Where Crypto Meets Traditional Money)

Even if your crypto activity is “on-chain,” most people still:

• fund accounts by e-transfer/wire/card,
  
• cash out to bank accounts,
  
• pay vendors via payment processors,
  
• move money between accounts.

That creates a traditional financial footprint – often the first place an auditor starts.

3.3 FINTRAC Reporting and Record Remnants (Why “Compliance Data” Exists)

FINTRAC is not the CRA – but Canada’s AML regime makes crypto intermediaries collect and retain information that can become highly relevant in tax audits. Even if you personally didn’t “save everything,” the intermediaries you used may have (and may be legally required to have) robust records.

3.4 Blockchain Analytics + Open/Investigative Data (CRA Doesn’t Work Alone)

The CRA is part of broader enforcement collaborations that explicitly involve crypto analytics expertise.

A CRA news release about the Joint Chiefs of Global Tax Enforcement (J5) “Cyber Challenge” describes investigators, cryptocurrency experts, and data scientists working to generate leads using data from open and investigative sources – and notes private-sector participation by blockchain analysis companies such as Chainalysis, BlockTrace, and AnChain.ai.

This isn’t theoretical. It’s an operational signal that tax authorities are investing in tools and partnerships that make on-chain activity more legible.

3.5 International Collaboration (J5 Intelligence Sharing)

The CRA’s J5 page describes the alliance as a “powerful operational alliance” that shares information and uses sophisticated technology to detect tax evasion arrangements across borders.

Another CRA release about crypto “risk indicators” emphasizes cross-border intelligence sharing capabilities and the role of detecting and reporting illicit activity involving crypto assets.

3.6 The Next Wave: Crypto‑Asset Reporting Framework (CARF)

Even if you’ve stayed under the radar so far, global policy is moving toward systematic reporting of crypto transactions by service providers.

• The Department of Finance Canada released draft legislation for previously announced tax measures (Aug 15, 2025), explicitly including implementing the OECD’s Crypto‑Asset Reporting Framework (CARF) in Canada.
  
• A Finance Canada statement about CARF notes an intention to transpose CARF into domestic law and activate exchange agreements “in time for exchanges to commence by 2027,” subject to national legislative procedures.

What this means for taxpayers: reporting and data matching are likely to get easier for governments – not harder.

4. What the CRA Will Ask For in a Crypto Audit

Crypto audits often boil down to one question: show us the complete story of your crypto: where it came from, where it went, and how you calculated what you reported.

Expect requests for:

• exchange exports (trades + deposits/withdrawals),
  
• wallet addresses used,
  
• CAD valuations used at transaction times,
  
• explanations for large deposits or “source of funds,”
  
• business vs capital position (and evidence supporting it).

5. Your Recordkeeping Obligations: The CRA’s Checklist (Non‑Optional)

The CRA’s own crypto recordkeeping page is unusually specific about what “adequate records” look like. It states you should keep, for each transaction:

• units and type of crypto-asset,
  
• date and time,
  
• value in Canadian dollars at the time,
  
• nature of the transaction and the other party (even if only their address),
  
• wallet addresses used,
  
• beginning and ending wallet balances (and cost) for each crypto-asset each year.
  

If you used exchanges/custodial platforms, the CRA also expects you to keep:

• trade ledgers (buy/sell/swaps),
  
• transfer ledgers (deposits/withdrawals of crypto and fiat),
  
• records supporting other transaction types on the platform.

Practical tip: Export your full history regularly.

6. If You Haven’t Reported Crypto Correctly: What to Do (Step‑by‑Step)

This is the part people delay until it’s too late.

Step 1: Stop guessing

Do not “estimate” gains based on memory or screenshots. Pull data:

• every exchange CSV export you can,
  
• every wallet address you used,
  
• fiat funding records (bank statements help reconcile).

Step 2: Reconstruct the ledger in CAD

You need a defensible CAD value at the time of each relevant event (not just “year-end value”).

Step 3: Decide the correct tax characterization

Many disputes come down to whether activity is on account of capital or business income. If you’re unsure, get advice before filing.

Step 4: Correct past filings before enforcement escalates

The earlier you act, the more options you typically have. The Voluntary Disclosures Program (VDP) may be available if certain conditions are met to correct mistakes or omissions in filing. 

Step 5: If penalties/interest are part of the problem, look at relief options

Relief from penalties and interest may be available under taxpayer relief provisions.

7. The “CRA Won’t Notice” Mistakes That Get People Burned

These are patterns that routinely create audit exposure:

• Ignoring crypto‑to‑crypto swaps
  
• Not tracking adjusted cost base (ACB)
  
• Using inconsistent pricing
  
• Forgetting to take into account fees
  
• Failing to keep contemporaneous records and trying to rebuild years later

Conclusion

Crypto tax compliance is no longer “optional because it’s hard.” The CRA is building (and already using) multiple pipelines to connect identities to crypto activity, and the recordkeeping expectations are clear. If your filings are accurate and your records are complete, audits become manageable. If they aren’t, the worst move is waiting – because the longer you wait, the more likely the CRA gets the data first.

Have you ever “borrowed” money from your own company or paid a personal expense out of the corporate account? It might seem harmless, but the Canada Revenue Agency (CRA) has a special rule to catch this activity: subsection 15(2) of the Income Tax Act (Canada). This rule can turn those shareholder loans or benefits into taxable income. In this article, we’ll break down what subsection 15(2) is, why the CRA uses it so often, examples of how it can be triggered, how serious the consequences can be, and practical ways to avoid or defend against these tax assessments.

What is Subsection 15(2) of the Income Tax Act (Canada)?

Subsection 15(2) is often called the “shareholder loan rule.” In general terms, if you (or someone connected to you) get a loan or owe a debt to your own corporation because you’re a shareholder, that amount can be treated as income on your personal tax return. In other words, the CRA may insist you pay tax on money your company lent you, just as if it were a salary or dividend payment. This prevents owners from pulling money out of a company tax-free by calling it a loan instead of income. Essentially, subsection 15(2) stops “hidden” benefits or dividends from flowing to shareholders without tax consequences.

There are exceptions in the law for genuine loans. For example, if the loan is repaid quickly or made for specific purposes, it might not be taxed. The default assumption is that a loan to a shareholder is a taxable benefit unless there is an exception.

Why Does the CRA Use Subsection 15(2) So Often?

The CRA commonly relies on this rule because without it, everyone could try to avoid taxes by taking money out of their company as “loans” instead of taxable income. The rule is an anti-avoidance measure: it’s there to catch situations where a shareholder is really enjoying corporate funds (for personal use) without paying the proper taxes.

In practice, CRA auditors pay close attention to shareholder transactions. It’s very common for small business owners to withdraw cash or pay personal bills from the company and park it in an accounting entry called “shareholder loan” or “due from shareholder.” The CRA knows this trick and frequently audits these accounts.

Recent CRA focus: As of 2025, the CRA is more vigilant than ever. It even launched a Shareholder Loan Audit initiative targeting small businesses, using automated systems to sniff out unreported shareholder benefits. They compare things like retained earnings, dividends, and shareholder withdrawals to flag any “loans” that look suspicious.

Examples: When Can a Shareholder Loan Become a Taxable Benefit?

It might not always be obvious which actions could trigger a 15(2) assessment. Here are some realistic scenarios that commonly lead to trouble:

• Personal Expenses Paid by the Company: If your corporation pays for a personal expense of yours, that’s a shareholder benefit. For instance, if the company pays your credit card bill or utility bill, or covers your personal vacation, the CRA sees that as a benefit to you as a shareholder. Often, accountants will record such payments as a loan to shareholder. But if you don’t reimburse the company quickly, the CRA can include those payments in your income under subsection 15(2).
• Direct Cash Withdrawals: The most basic example is taking cash out of the company for yourself without declaring it as salary or dividend. For example, if you write yourself a cheque or e-transfer from the business account and just book it as a “shareholder withdrawal,” it creates a loan from the corporation to you. If that withdrawal isn’t repaid or otherwise accounted for, it’s essentially income in the CRA’s eyes. Many owners do this unknowingly – they treat the company bank account like their own. But those informal withdrawals are exactly what subsection 15(2) targets.
• Personal Use of Corporate Assets: This is slightly different but related to shareholder benefits. If you use a company asset personally (for example, you live in a company-owned house or drive a company car for personal use), the value of that usage can be a taxable shareholder benefit. While this might be taxed under a different provision (15(1) for benefits), it often goes hand-in-hand with shareholder loan issues. For instance, costs paid by the company for that asset (maintenance, etc.) might get dumped into your shareholder loan account.

Key point: Many of these situations start innocently or even by mistake. It’s common for bookkeepers to record things to a shareholder loan account without the owner realizing it. But if those transactions aren’t corrected, they can snowball into a tax problem.

Why a Subsection 15(2) Tax Assessment is Serious

Getting hit with a 15(2) assessment is no small matter – it can be quite harsh. Here’s what it means and why you want to avoid it:

• Income Inclusion: The full amount of the loan or debt gets added to your personal taxable income.
• Tax and Interest: The inclusion is retroactive to the year the loan was taken. In practice, if the CRA finds in 2025 that you had that shareholder loan in 2024, they’ll reassess your 2024 tax return to include it. That means you’ll owe the back-taxes as if it should have been reported in 2024, plus interest charged from the date the 2024 taxes were due.
• Possible Penalties: If the CRA believes you knowingly tried to evade tax by using shareholder loans, they can also apply penalties. A common one is the gross negligence penalty under subsection 163(2) of the Income Tax Act (Canada), which is 50% of the tax avoided.
• No Deduction for the Company: Lastly, remember that if a benefit is assessed to you, it’s not deductible to the corporation. So the company can’t write it off as an expense (unlike a salary which is deductible)

How to Avoid or Defend Against Shareholder Loan Assessments

The good news is that with a bit of planning and discipline, you can avoid the 15(2) trap. And even if you’re already in the trap, there are ways to mitigate the damage. Here are some practical strategies for business owners:

• Repay Shareholder Loans Within the Allowed Timeframe: The simplest way to avoid a loan being taxed under subsection 15(2) is to pay it back fast. This rule generally gives you until one year after the end of the corporation’s tax year in which the loan was made to repay the loan. Don’t try to game the system by repaying the loan and taking a new loan. The law has an anti-avoidance rule about a “series of loans and repayments.” If you repay just before the deadline and then the company loans you a similar amount shortly after, the CRA can deem that you never really repaid it at all. In short, make sure the repayment is genuine and lasting.
• Consider Declaring Income to Clear the Loan: Many owners find it hard to actually pay back a large loan in cash. One common strategy (and one that CRA finds acceptable) is to clear the shareholder loan by converting it into a dividend or bonus. In other words, your company can declare a dividend or pay you a salary/bonus that you use to offset the loan balance. The amount of the loan then effectively becomes taxable income (as a dividend or salary) on your return, which is what would have happened anyway, but you’ve formalized it. Yes, you’ll pay tax on that dividend or bonus, but that’s much better than leaving the loan hanging and then facing a retroactive 15(2) inclusion with the possibility of penalties. In practice, many accountants will do this at year-end: if they see a shareholder loan outstanding, they’ll advise the company to declare a dividend to wipe it out.
• Separate Personal and Business Expenses: Try not to mix personal expenditures with your company’s finances. It’s easy to slip up (using the wrong credit card, etc.), but maintaining a clear separation will save you headaches. When you blur the lines, those amounts often end up in the shareholder loan account. Keep diligent records and have your bookkeeper categorize transactions correctly.
• Meet the Exceptions (If They Apply): Subsection 15(2) has several built-in exceptions for certain loans. If you qualify for one, the loan won’t be taxed as a benefit. The most common exception is for loans to employees (who happen to be shareholders) for specific purposes.

How a Tax Lawyer Can Help if the CRA Comes Knocking

Despite best efforts, mistakes happen and CRA audits do occur. If you’re facing a potential subsection 15(2) issue – maybe you’ve received a CRA audit notice or a reassessment for a shareholder loan – getting professional help is wise. Here’s how a tax lawyer can assist:

• Assessing Your Exposure: A tax lawyer can review your company’s books, especially the shareholder loan account, to determine how much of it might be at risk of being treated as income. They know the 15(2) rules inside-out and can identify what transactions the CRA is likely to challenge. Often, they’ll catch things you might not, like a pattern that CRA could view as a series of loans, or documentation gaps. This initial review helps you understand the scope of the problem and plan a response.
• Dealing with the CRA on your behalf: Facing CRA auditors or appeals officers can be stressful. Tax lawyers are experienced in communicating with the CRA. They can prepare a formal response to an audit proposal or file a Notice of Objection to fight a reassessment. In doing so, they’ll present legal arguments as to why a particular amount shouldn’t be taxed (maybe arguing it falls under an exception, or it was actually repaid, or even that it was an accounting error). They know what arguments have worked in past court decisions and can cite those precedents (for instance, cases where courts sided with taxpayers because the loans were for business purposes or because the taxpayer acted in good faith). By objecting and negotiating, they can often reduce or cancel the proposed taxes. Importantly, when a Notice of Objection is filed, it generally halts collection action on the disputed amount, giving you breathing room while it’s resolved.
• Penalty Negotiation: If penalties have been applied (such as the gross negligence 50% penalty), a tax lawyer will aggressively challenge them if there’s any justification to do so. The CRA must prove “gross negligence,” and if you have some evidence that you acted reasonably or relied on professional advice, lawyers can argue to have those penalties removed.
• Protecting Your Rights and Strategy: Perhaps most importantly, a tax lawyer brings solicitor-client privilege and strategy to the table. Your discussions with them are confidential (unlike with an accountant), so you can candidly explore all options. They’ll devise a plan – whether it’s to negotiate a settlement with CRA or to take the matter to Tax Court if needed. In complex cases, they might work alongside forensic accountants to reconstruct loan accounts and prove repayments were made.

In summary, don’t go it alone if you’re facing a hefty shareholder loan assessment. The stakes – taxes, interest, penalties – can be high, and the rules are complex. A tax lawyer will help ensure the CRA doesn’t overreach, and that you pay no more than you truly owe.

Subsection 15(2) of the Income Tax Act (Canada) is an important rule for any Canadian business owner with a corporation. It’s all about the CRA making sure you don’t enjoy corporate profits personally without paying the proper tax. By understanding this rule, keeping good records, and planning withdrawals carefully, you can avoid the common pitfalls. If the CRA does come auditing, remember that you have options and rights – including the right to get professional help from tax lawyer who deal with these issues regularly.

This article was originally published by Law360 Canada (www.law360.ca), part of LexisNexis Canada Inc.

The CRA’s Voluntary Disclosures Program (VDP) is the built‑in safety valve for taxpayers and businesses who need to fix past tax non‑compliance – before the CRA fixes it for them.

If you failed to file returns, under‑reported income, missed foreign reporting, or messed up GST/HST, the VDP is the formal process to correct those errors. If the CRA grants relief, you may receive penalty relief, interest relief, and no referral for criminal prosecution – but you still pay the underlying tax owing.

This guide walks you through:

• Who qualifies (and who doesn’t)
• The 10‑year relief limit most people overlook
• The difference between unprompted vs. prompted disclosures (and why it matters)
• What relief is available (general relief, partial relief, wash transactions relief)
• How to file a complete RC199 package that the CRA can actually process
• What happens after you apply (including second review and judicial review)
• Why VDP applications get denied – and how to avoid the common traps

1. What Is the CRA Voluntary Disclosures Program?

The VDP is an opportunity to tell the CRA about errors or omissions in your tax obligations and correct them. If the CRA grants relief under the VDP, you can receive some penalty and interest relief and will not be referred for criminal prosecution for the issues disclosed – but any taxes owing still have to be paid in full.

The program applies across a wide range of CRA‑administered obligations. For example, it covers disclosures related to GST/HST and excise taxes, income tax, excise duties, the fuel charge (carbon pricing), luxury tax, underused housing tax, digital services tax, global minimum tax, and certain other federal charges.

Importantly:

• VDP relief is about penalties/interest and prosecution protection – not the tax itself. You generally still pay the tax you should have paid in the first place.
• The CRA reviews VDP requests case‑by‑case, and it is not required to grant relief just because you apply.
• You must be at least one year (or one reporting period) past the filing due date for the issue you’re correcting.
• The CRA expects you to stay compliant going forward. The CRA may consider a later VDP application only in limited circumstances (for example, if the new issue is different or beyond your control).

2. The 10‑Year Limit You Cannot Ignore

The VDP can be hugely helpful – but relief is not unlimited.

For income tax, the CRA’s ability to cancel penalties and interest is constrained by a 10‑year limitation period:

• Penalty relief: limited to penalties that could apply to tax years that ended within the previous 10 years before the calendar year you file the application.
• Interest relief: the CRA can cancel interest that accrued during the 10 calendar years before the year you request relief (even if the underlying tax debt is older).

For GST/HST and other “applicable Acts,” relief is also tied to statutory limitation periods under those Acts. Bottom line: don’t assume a disclosure automatically wipes away decades of interest and penalties – get clear on what years/periods are realistically inside the relief window.

3. Who Can Apply?

Most taxpayers and registrants can apply.

Taxpayers include:

• Individuals
• Employers
• Corporations
• Partnerships
• Trusts

Registrants include (examples):

• GST/HST registrants or claimants
• Excise duty licensees/registrants
• Excise tax licensees
• Excise tax refund claimants
• Air travellers security charge registrants / designated air carriers
• Softwood lumber product exporters

4. What Issues Are Typically Eligible?

If you’re fixing a real compliance problem (something that normally attracts interest and/or penalties), you’re in the territory the VDP is designed for.

Common VDP‑eligible situations include:

• Not filing a tax return (and it’s now at least one year late)
• Not reporting or under‑reporting income
• Claiming ineligible expenses
• Not remitting employee source deductions (CPP/EI, etc.)
• Not filing required information returns (for example, T1135)
• Not reporting foreign‑sourced income taxable in Canada
• Having undisclosed tax liabilities
• Failing to charge, collect, or report GST/HST
• Claiming ineligible GST/HST credits, refunds, or rebates
• Providing incomplete information on a return

5. The Eligibility Checklist

To be eligible for VDP relief, you must meet all five conditions below:

1. Apply before an audit or investigation starts against you (or a related taxpayer) about the information being disclosed.
2. Include all relevant information and documentation for the required tax years/reporting periods.
3. The disclosure involves an error or omission with applicable interest charges and/or penalties.
4. The information is at least one year (or one reporting period) past the filing due date.
5. You include payment of the estimated tax owing, or a request for a payment arrangement (subject to CRA approval).

What CRA officers care about in practice:

• Voluntary timing: Did you come in before the CRA started enforcement for this issue?
• Completeness: Are all affected years/periods covered, or are there obvious gaps?
• Paperwork quality: Are the returns/forms/schedules actually filed and consistent with your story?
• Payment realism: If you’re asking for a payment arrangement, is it reasonable and supported? The CRA’s approval is not guaranteed.

6. Unprompted vs. Prompted: The One Difference That Drives Your Relief

The updated VDP (effective October 1, 2025) uses two application types:

Unprompted application

You’re normally unprompted when:

• You apply when there has been no CRA communication (verbal or written) about an identified compliance issue related to the disclosure; or
• You apply after an education letter or notice that offers general guidance and filing information on a topic (those usually do not “prompt” you into a lower tier).

Example: You discover a missed T1135 and unreported foreign income, and you apply before the CRA identifies your specific issue.

Prompted application

You’re generally prompted when:

• You apply after CRA communication that identifies the compliance issue, such as a letter/notice (excluding education letters) that:
  • identifies a specific error or omission on your account, and/or
  • gives a deadline to correct the issue; or
• You apply after the CRA has already received third‑party information about potential non‑compliance involving you (or a related taxpayer/registrant).

Example: The CRA sends a letter saying they found a specific omission on your account and expects you to correct it by a certain date.

Why this matters:

Your application type typically determines whether you qualify for general relief or partial relief (next section).

7. What Relief Can You Get?

If the CRA grants VDP relief, there are different levels depending on whether your application is unprompted or prompted.

General relief (normally for unprompted applications)

• 75% relief of the applicable interest
• 100% relief of the applicable penalties

Partial relief (normally for prompted applications)

• 25% relief of the applicable interest
• Up to 100% relief of the applicable penalties

Wash transactions relief (GST/HST)

Certain GST/HST “wash transaction” situations are normally eligible for 100% relief of interest and penalties, where they fall under the CRA’s wash transaction policy.

8. How to Apply (Form RC199 Step‑by‑Step)

The CRA will consider fully completed applications only. Your application must include three things: a signed RC199, the necessary supporting documents to correct the issue, and payment or a payment arrangement request.

Step 1: Gather everything (don’t guess if you don’t have to)

Your VDP package should include:

• The completed and signed Form RC199
• All necessary returns, forms, schedules, and statements needed to correct the non‑compliance
• Payment, or a request for a payment arrangement, for the estimated tax owing

Step 2: Be complete

A “complete” disclosure generally means:

• You disclose all known errors and omissions.
• You respond comprehensively and promptly to CRA requests for additional information (if they ask).

Step 3: Include payment (or request a payment arrangement)

A valid application must include payment of the estimated tax owing or a request for a payment arrangement, subject to CRA approval.

Step 4: Submit using one method

You can submit online, by fax, or by mail — but use only one method.

• Online: through CRA My Account (individuals), My Business Account (businesses), or Represent a Client (representatives).
• Fax: 1‑888‑452‑8994
• Mail:
   Voluntary Disclosures Program
   4695 Shawinigan‑Sud Boulevard
   Shawinigan, QC G9P 5H9

Optional – Pre‑disclosure discussion (anonymous)

If you’re unsure whether to apply, the CRA offers a pre‑disclosure discussion service where you can speak anonymously to get insight into the process and risks. It’s informal and non‑binding, and it does not guarantee relief.

9. What Happens After You Apply?

If the CRA grants VDP relief, it will send you a letter confirming:

• whether the application is treated as unprompted or prompted,
• what level of relief applies (general, partial, or wash transactions), and
• which tax years/reporting periods are eligible.

If the CRA does not grant relief, it will send a letter explaining why.

If you disagree with CRA’s decision

You can:

• request a second administrative review, and/or
• apply to the Federal Court for judicial review.

10. Common Reasons VDP Applications Get Denied

From the CRA’s published requirements, the same pitfalls show up repeatedly:

• It’s not voluntary: an audit or investigation has already started on the issue.
• It’s incomplete: missing returns, missing schedules, missing periods, or missing facts.
• No payment / no payment plan request: you didn’t include payment or a payment arrangement request.
• Wrong tool for the job: you’re trying to use VDP for refund‑only adjustments, already‑assessed penalties/interest, elections, etc.
• You left out other non‑compliance: the CRA later discovers additional issues you didn’t disclose – a major credibility problem.
• You don’t respond to CRA follow‑ups: failure to provide additional information within CRA timeframes can lead to denial.

11. How a Tax Lawyer Can Strengthen a VDP Application

A good VDP application is part accounting, part law, and part “storytelling with evidence.”

A tax lawyer can help by:

• Assessing eligibility early (so you don’t make a disclosure that gets rejected.
• Positioning unprompted vs. prompted correctly, based on CRA’s definitions and the communications you’ve received.
• Ensuring the disclosure is complete (all affected years/periods, all required supporting documents, no silent gaps).
• Managing risk and communications (including responding to CRA requests and keeping the process controlled).
• Challenging an unfair result, through a second administrative review and, where appropriate, judicial review in Federal Court.

12. Need Help With the CRA Voluntary Disclosures Program?

If you know (or strongly suspect) you have unreported income, missing filings, or serious GST/HST issues, doing nothing is usually the worst option. The VDP exists so you can correct the past with significantly reduced consequences – but relief is not automatic, and a poorly prepared application can be denied.

If you’re unsure whether you qualify, or you want help preparing a complete RC199 package, getting professional advice early can make the difference between:

• a clean disclosure with meaningful relief, and
• a denied application with the CRA now aware of the issue.