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What is The IRS Voluntary Disclosure Practice?

Zuckerman Law, LLC Feb. 28, 2022

IRS USA Government home pageWhen taxpayers do not file tax returns or willfully file tax returns while providing false information, they may face penalties from the Internal Revenue Service (IRS) and interest from the date their taxes were due. However, taxpayers may be eligible to use the IRS Voluntary Disclosure Program to avoid criminal prosecution.

In essence, the program gives taxpayers who have committed tax-related crimes and have criminal exposure a chance to correct their errors in exchange for avoiding criminal prosecution or mitigating the possible penalties.

At Zuckerman Law, LLC, I represent people who are considering making voluntary disclosures to the IRS to avoid a criminal tax investigation and the ensuing penalties. If you have violated the law or committed wrongdoing when filing tax returns or submitting forms to the IRS, let me help you review the options available to you. I provide tax-related counsel to taxpayers in Fort Lauderdale and across South Florida, including the areas of Miami, Boca Raton, North Miami Beach, Sunny Isles, Hollywood, and Aventura.

What is an IRS Voluntary Disclosure Practice?

The IRS Involuntary Disclosure Practice allows taxpayers who wish to avoid criminal prosecution for tax-related crimes to disclose their errors or omissions voluntarily before the IRS contacts the taxpayer to warn them about the possible penalties.

IRS Criminal Investigation is tasked to review all voluntary disclosures made by taxpayers when determining whether or not to punish taxpayers for their errors or omissions. However, disclosures to the IRS must be timely and accurate in order for IRS Criminal Investigation to determine whether or not to recommend criminal prosecution.

A taxpayer could avoid criminal prosecution or mitigate possible penalties caused by not filing tax returns or knowingly providing false information to the IRS if they:

  1. Provide timely and complete disclosure of their errors or omissions to IRS Criminal Investigation

  2. Cooperate with the IRS Criminal Investigation in determining the tax liability

  3. Make good faith efforts to pay the owed taxes, interest, and penalties (if applicable)

It is important to keep in mind that a voluntary disclosure does not automatically guarantee a taxpayer’s immunity from criminal prosecution.

What Is Considered a Timely Disclosure?

According to the IRS website, disclosure is considered “timely” when the IRS receives the taxpayer’s disclosure before the federal agency has:

  • Initiated a criminal investigation against the taxpayer or performed a civil examination

  • Received information about the taxpayer’s tax-related crimes from a third party

  • Learned about the taxpayer’s non-compliance from a search warrant or other criminal enforcement actions

What is the IRS Voluntary Disclosure Program?

The IRS Voluntary Disclosure Program is different from the practice itself. Under the IRS Voluntary Disclosure Program, taxpayers can reach out to the IRS to resolve their tax-related matters if they fail to disclose their income to the agency. However, taxpayers whose income comes from illegal sources or activities are not eligible for the program. The program may also apply to unreported investments, accounts, assets, and offshore income.

Who Can Disclose?

Any taxpayer can disclose their tax-related crimes, including failure to file tax returns or knowingly providing false information. However, if a taxpayer’s tax-related violation was not willful, there may be other options available to the taxpayer, including filing amended tax returns or past due returns.

How to Disclose

The formal process of making a voluntary disclosure to the IRS involves the following steps:

  1. File Part I of Form 14457

  2. Once the taxpayer is approved to the program, they can file Part II of the form

  3. The taxpayer must make sure that their submission of the form is timely (see the definition of “timely disclosure” above)

When initiating a voluntary disclosure, a taxpayer should contact the nearest office of IRS Criminal Investigation in their area.

Should You Use the IRS
Voluntary Disclosure Program?

Determining if the IRS Voluntary Disclosure Program is right for your specific situation depends on many factors, including whether or not your violation of the law was willful, whether or not the IRS is aware of your violations, and other circumstances. Generally, taxpayers considering making a voluntary disclosure to the IRS should consider consulting with an experienced tax law attorney to discuss their unique situation.

How a Knowledgeable Attorney Can Help

The IRS Voluntary Disclosure Program may not be appropriate for everyone. For this reason, a knowledgeable tax law attorney can help you understand whether or not using the program is right for you. At Zuckerman Law, LLC, I am here to help you determine if participating in the IRS Voluntary Disclosure Practice is the right option in your specific situation. I proudly serve the needs of clients in Fort Lauderdale and across South Florida, including the areas of Miami, Boca Raton, North Miami Beach, Sunny Isles, Hollywood, and Aventura. Reach out today for help with your tax issues.