The IRS’s Voluntary Disclosure Practice for Willful Noncompliance

The U.S. Government’s Crackdown on Tax Evasion

In recent years, the U.S. government has taken significant actions against Swiss banks for their role in aiding American clients to evade taxes. This crackdown is part of a broader initiative to combat tax evasion and promote financial transparency. The shift in the landscape of international banking and tax compliance reflects the government’s commitment to upholding tax laws and holding both financial institutions and individuals accountable. Dealing with the IRS often evokes anxiety and concern, especially when facing potential criminal charges due to tax non-compliance. It’s critical to understand the options available, such as the IRS Criminal Investigation Voluntary Disclosure Practice (VDP), to address these issues proactively and mitigate the risks involved.

The Function of Voluntary Disclosure

The IRS Voluntary Disclosure Practice is a lifeline for individuals and entities that have willfully avoided their tax obligations. Willful failure to comply with tax laws means intentionally avoiding tax payments or filing requirements. VDP enables taxpayers to come forward and disclose their willful noncompliance to the IRS before the IRS initiates a civil examination or criminal investigation against them.

To make a voluntary disclosure, you must provide a truthful, timely, and complete disclosure of all facts regarding your tax noncompliance. This process involves submitting all required documents, including a Form 2848 for each individual and entity, cooperating fully with the IRS to determine the correct tax liability, and paying the owed tax, interest, and penalties. A disclosure is considered timely if it is made before the IRS has started an investigation or obtained information about the noncompliance.

Consequences and Benefits

The primary benefit of making a voluntary disclosure is the prospect of avoiding criminal prosecution. While it doesn’t guarantee immunity, it significantly reduces the likelihood of facing criminal charges if the disclosure is complete, accurate, and timely. However, entering the VDP is a serious decision that should be made with full awareness of the willful actions and their consequences.

For those whose noncompliance was not willful—meaning it was due to a misunderstanding or mistake—other avenues like filing amended returns or delinquent return procedures may be more appropriate. It’s important to distinguish between willful evasion and accidental errors to choose the correct path for resolving tax issues.

Taxpayers considering the VDP should be prepared with all necessary documentation and must understand the gravity of declaring willful noncompliance. Incomplete applications or failure to provide required documents can result in removal from the program. Additionally, extensions are limited, and if you cannot meet the extended deadline, withdrawal from the program may be necessary.

Addressing tax noncompliance is a challenging situation that requires careful consideration and strategic planning. The VDP offers a pathway to rectify willful tax violations, but it demands honesty, thoroughness, and prompt action. For those navigating these decisions, professional legal advice is not just beneficial; it’s essential.

In these intricate tax matters, having a knowledgeable ally can make all the difference. Weisberg Kainen Mark is well-equipped to guide you through the process of making a voluntary disclosure or finding the most appropriate solution for your tax concerns. We encourage you to reach out and schedule a consultation with us to explore your options and ensure you’re taking the right steps toward compliance and peace of mind.

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Weisberg Kainen Mark, PL

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