How to Avoid Criminal Prosecution Through Voluntary Disclosure

The Voluntary Disclosure Practice is an IRS-created option of the IRS Criminal Investigations for U.S. Taxpayers at risk for criminal prosecution due to a tax-related offense. Taxpayers who have willfully failed to submit tax information reports may willingly submit a voluntary disclosure letting the IRS know of this noncompliance in order to resolve their non-compliance and limit exposure to criminal prosecution. The IRS Criminal Investigations takes such voluntary disclosures under consideration in order to determine whether to recommend criminal prosecution or not. 

Is Voluntary Disclosure the Way to Go?

Voluntary Disclosure Practice is for Taxpayers who have committed tax or tax-related crimes and have criminal exposure due to willful violations of the law. A Taxpayer can voluntarily disclose when they knowingly or willfully were non-compliant and thus not able to certify to being non-willful and qualify for any other filing procedures. Taxpayers who participate in this practice do so to seek protection from potential criminal prosecution. 

Through this program, a Taxpayer can limit their offshore non-compliance and thus limit their penalties to six years. The first step in Voluntary Disclosure is cooperating with the IRS Criminal Investigations to determine your federal tax liability. Next, a Taxpayer must prepare to pay all tax, interest, and penalties owed. After disclosure, cooperation, and payment the IRS CI will take your voluntary disclosure and use it to determine whether they will make a recommendation for criminal prosecution or not. Keep in mind voluntary disclosure does not guarantee immunity from prosecution only a possibility that criminal prosecution will not be recommended. Additionally, the money disclosed must be obtained legally. Taxpayers who obtain money illegally will not qualify for VDP. 

Another aspect of voluntary disclosure is that it must be timely as well. To be timely according to the IRS, they have to receive the disclosure before: (1) the IRS has commenced a civil examination or criminal investigation, (2) the IRS receives info from a third party alerting them of a Taxpayer’s noncompliance, and (3) the IRS acquired info directly related to noncompliance from a criminal enforcement action. Taxpayers who do not file their voluntary disclosures before the above scenarios will not be eligible to voluntarily disclose.

How to Disclose?

First, a Taxpayer must fill out Part I of Form 14457, Voluntary Disclosure Practice Preclearance Request and Application to request preclearance which determines eligibility for the practice. Taxpayers may submit Part I to either Fax: 267-466-1115; or Mail: IRS Criminal Investigation Attn: Voluntary Disclosure Coordinator 2970 Market St. 1-D04-100 Philadelphia, PA 19104.

Next, if a Taxpayer has received preclearance confirmation, he or she must submit Part II of the Voluntary Disclosure Application within 45 days. The IRS Criminal Investigations will then review Part II of Form 14457 to determine whether the Taxpayer may participate in the Voluntary Disclosure Practice.

If a Taxpayer is approved to participate in the practice, CI will send the Taxpayer a Preliminary Acceptance Letter and forward the Taxpayer’s Form 14457 to a civil section of the IRS. Once the case is assigned, the assigned examiner will contact the Taxpayer and the Taxpayer must then cooperate with the examiner in all aspects of providing documents and information.

To learn more about the updated Voluntary Disclosure Program go to: 

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