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What Is the IRS Voluntary Disclosure Practice?

Law Office of Scott N. Tisevich June 28, 2024

Hand putting tax icon in the wooden cubeDealing with tax issues can feel like carrying a heavy weight on your back, especially when you're unsure of your next steps. If you've found yourself in a situation where you need to come clean about past tax mistakes, the IRS voluntary disclosure practice might be an option worth considering.  

This IRS voluntary disclosure practice may be an effective way to limit your criminal and civil liability for tax non-compliance, though the program has its pros and cons and may not be appropriate for everyone.  

In his practice as a tax resolution attorney, Scott N. Tisevich has represented thousands of clients who had tax issues and decided to make voluntary disclosures to the IRS. He can help you determine whether the IRS voluntary disclosure practice could provide you with the relief you are looking for.  

What Is the IRS Voluntary Disclosure Practice?

The IRS voluntary disclosure practice is a program that allows taxpayers to come forward and correct previous tax misdeeds. Whether you've underreported income, missed filing deadlines, or made errors in your tax return, this practice offers a path to compliance. 

The primary purpose of the program is to encourage taxpayers to voluntarily report previously undisclosed income and correct inaccuracies in their tax filings, including errors made by a tax professional. This initiative aims to provide a fresh start for individuals who genuinely want to rectify their tax situation.  

The IRS's voluntary disclosure practice is grounded in legal principles that promote transparency and fairness. By coming forward voluntarily, taxpayers can often avoid the most severe penalties associated with tax fraud or evasion. However, you might want to consult with a tax lawyer before you participate in the program to discuss the potential implications.  

How the IRS Voluntary Disclosure Practice Works

The first step in the process is making an initial disclosure to the IRS. This initial step is crucial as it sets the stage for all subsequent actions. You'll be required to provide basic information about your tax situation and any previous inaccuracies. 

After the initial disclosure, you'll be required to submit detailed information about your tax returns, including any unreported income and discrepancies. This stage involves thorough documentation and may require assistance from a tax preparation attorney to ensure accuracy.  

Once all necessary information is submitted, the IRS will review your case. This review process is comprehensive as it takes into account all aspects of your tax situation. The IRS will then make a decision regarding penalties and any potential criminal charges if applicable.  

Who Qualifies for the IRS Voluntary Disclosure Practice?

To be eligible for the program, you must meet specific criteria set by the IRS. This includes having undisclosed income or errors in your tax returns that you wish to correct voluntarily. It's essential to review these criteria carefully to ensure you qualify. 

Certain individuals and situations are excluded from the program. For instance, if the IRS has already initiated an investigation into your tax affairs, you may not be eligible for voluntary disclosure. 

There are special cases where the IRS voluntary disclosure practice may still apply, even if you think you might be excluded. You might want to consult with a tax attorney to understand your options and make an informed decision.  

The Benefits and Potential Drawbacks of the IRS Voluntary Disclosure Practice

Just about anything has its pros and cons, and participating in the IRS voluntary disclosure practice is no exception. Let’s start with the benefits. Understanding the advantages of participating in the IRS voluntary disclosure practice can help you decide if this program is the right choice for you. 

  • Reduced penalties. By coming forward voluntarily, you may avoid some of the harsher penalties associated with tax fraud or evasion. 

  • Peace of mind. Knowing that you've taken steps to correct past tax mistakes could help put your mind at ease. The IRS voluntary disclosure practice allows you to resolve your tax issues and move forward without the constant worry of potential legal consequences. 

  • Legal protections. Engaging in the program offers certain legal protections that you wouldn't have otherwise had. This includes protection from criminal prosecution, provided you comply with all program requirements. 

While the IRS voluntary disclosure practice offers many benefits, there are also potential drawbacks to consider:  

  • Possible penalties. Although the program aims to reduce penalties, you may still be penalized by the IRS. Understanding the potential financial impact is crucial before proceeding. 

  • Disclosure of information. Participating in the program requires you to disclose detailed information about your tax situation. Some individuals may find this level of transparency uncomfortable. 

  • Time-consuming process. The process of participating in the IRS voluntary disclosure practice can take some time. Be prepared for a lengthy process that requires patience and attention to detail. 

Generally, if you willfully failed to tax or tax-related obligations and this non-compliance could expose you to criminal liability, the program may be an option worth considering. But whether or not you should participate in the IRS voluntary disclosure practice depends on your particular situation and may require a consultation with an attorney.  

Discuss Your Options With an Attorney

If you want to learn more about the IRS voluntary disclosure practice or discuss any of your concerns regarding potential criminal liability for tax mistakes, contact Scott N. Tisevich, Attorney at Law. With more than 30 years of experience practicing tax law, Scott N. Tisevich provides each client with personalized attention and always strives to find the most favorable solutions for his clients in tax disputes with taxing authorities. Get in touch today to get a free consultation.