Tax Law Center Blog

In December 2025, the IRS announced a 90-day comment period inviting input on proposed revisions to its under-utilized Voluntary Disclosure Practice (VDP). The VDP allows non-compliant taxpayers to come forward, disclose their noncompliance, and resolve their tax and reporting obligations before facing potential criminal prosecution. For appropriate taxpayers, the VDP program may be a good opportunity to clean up past worrisome non-compliance.

The IRS has included some detailed (and some ambiguous) FAQs in its new VDP proposal, buried in the proposal. The FAQs clarify eligibility, timeliness standards, procedural steps, and payment requirements, emphasizing that disclosures must be truthful, complete, and submitted before the IRS initiates enforcement or obtains third-party information. They also outline a more structured framework for conditional acceptance, including defined disclosure periods and deadlines for filing returns and paying tax, interest, and penalties.

The FAQs are cut and pasted below.

Voluntary Disclosure Practice Frequently Asked Questions and Answers

1. What is the Voluntary Disclosure Practice?The IRS Criminal Investigation division administers the Voluntary Disclosure Practice (VDP) for taxpayers who willfully failed to comply with tax laws. It allows them to come forward, disclose their noncompliance, and resolve their tax and reporting obligations before facing potential criminal prosecution.
2. Who may disclose?Any taxpayer (individual or entity) who willfully failed to report income, pay taxes, or submit required information returns or reports, or who willfully reported overstated deductions, may request participation in the VDP. VDP is designed for those taxpayers whose conduct was intentional or deliberate, not accidental or due to misunderstanding. Taxpayers who made a non-willful error in filing their taxes should consider options that include amended returns or delinquent returns, among others.
3. How would disclosure work under the proposed VDP?Under the proposed VDP framework, taxpayers who receive conditional approval from the IRS Criminal Investigation division must, within three months, file all required amended or delinquent returns and reports, pay taxes, penalties, and interest in full, and sign required agreements. The disclosure period generally includes the most recent six years of amended or delinquent returns and reports.
4. For taxpayers who already applied to the VDP, can they rescind their application and wait to file under the proposed VDP?If an application to the current VDP has not yet been preliminarily accepted, taxpayers can notify vdp@ci.irs.gov of their intention to switch to the proposed VDP. If the application to the current VDP has been preliminarily accepted, but the taxpayer hasn’t been contacted by the examining agent, they should contact lbieefaustindisclosure@irs.gov. However, if the VDP examination has already begun and the taxpayer responded to the document request from their examiner, they must stay in the version of VDP they were accepted into.
5. If a taxpayer hasn’t provided returns to an examiner under the current VDP, can they qualify for the proposed VDP?If a taxpayer’s returns have not been submitted or reviewed, they may be eligible to participate in the proposed VDP once finalized. Taxpayers should contact lbieefaustindisclosure@irs.gov to express their interest in switching to the proposed VDP.
6. What are the proposed penalties? Generally, the penalty framework is standardized for clarity and consistency:
   • For delinquent returns, failure-to-file penalties apply; failure-to-pay penalties do not.
   • For amended returns, a 20 percent accuracy-related penalty applies to each year.
   • For delinquent or amended Reports of Foreign Bank and Financial Accounts (FBARs), penalties apply per year and are subject to annual inflation adjustments.
   • For delinquent or amended international information returns, penalties up to $10,000 per return, per year, apply.
7. Where can taxpayers and tax practitioners provide feedback about the proposed VDP changes?Taxpayers and tax practitioners may email questions or comments regarding the proposed VDP updates to vdp@ci.irs.gov with the subject line “PROPOSED VDP PUBLIC COMMENT.” Comments must be received by March 22, 2026, to ensure consideration.​​​​​
8. What is the difference between the VDP process and the current streamlined filing compliance procedures?Taxpayers who wish to participate in the VDP must meet the element of willfulness—the intentional, purposeful, deliberate act to hide income or assets, or to claim overstated expenses and, therefore, evade filing requirements or payment of tax. Taxpayers who made a non-willful error in filing their taxes should consider options that include amended returns or delinquent returns, among others.
9. What is the benefit for taxpayers who choose the VDP?Taxpayers who make a timely, truthful voluntary disclosure through the VDP and meet all requirements may avoid criminal prosecution. While penalties apply, the program provides predictable resolution terms and helps taxpayers come into full compliance without facing the risk of a criminal referral.
10. What should taxpayers without access to past tax documentation to file amended or delinquent returns or reports do?Taxpayers should make reasonable efforts to obtain missing records from employers, financial institutions, or other sources. If records are unavailable, they must provide reasonable estimates and document how the estimates were calculated. Supporting statements or affidavits may be required.
11. Is there a longer disclosure requirement for taxpayers who have not filed taxes for more than the six years required in the disclosure?Under the proposed framework, taxpayers must file returns and reports for the disclosure period only, the most recent six years.
12. Do taxpayers who did not know they had a tax obligation and didn’t file qualify for the VDP?If a taxpayer’s voluntary disclosure narrative states they were merely negligent or careless and does not fully describe willful non-compliance, the clearance request will be denied. The VDP is for taxpayers whose noncompliance was willful and deliberate. Those with non-willful conduct should pursue options that include filing amended returns or delinquent returns, among others.
13. Are taxpayers eligible to participate in the proposed VDP if they cannot fully pay all tax, penalties, and interest?No. Full payment within three months of clearance is required.
14. How can taxpayers determine what penalties they will owe?Generally, for delinquent returns, failure-to-file penalties apply but not failure-to- pay penalties. For amended returns, accuracy-related penalties apply at 20 percent. For delinquent or amended Reports of Foreign Bank and Financial Accounts (FBARs), penalties apply per year and are subject to annual inflation adjustments. For delinquent or amended international information returns, penalties up to $10,000 per return, per year, apply. Taxpayers should work with a licensed tax professional to calculate the correct penalties or use IRS self-help resources before submitting a clearance request.
15. Do taxpayers need to submit Form 2848, Power of Attorney and Declaration of Representative?If a voluntary disclosure is being presented through a power of attorney, a separate Form 2848, Power of Attorney and Declaration of Representative, is required for each taxpayer and entity entering the VDP. The IRS Criminal Investigation division will not accept a combined list of taxpayers on one form.
16. If a taxpayer received a conditional approval letter from the IRS Criminal Investigation division and filed amended returns, but then realized they made a mistake on the submitted returns, what should they do?The taxpayer should promptly notify the contact or office listed on the conditional approval letter and provide corrected information and supporting documentation. Depending on the nature of the error, a second amended return may be required.
17. If a taxpayer received a conditional approval letter from the IRS Criminal Investigation division, but then decided to follow streamlined filing compliance procedures, are they able to withdraw their application?Taxpayers may withdraw from the VDP before final acceptance. However, once a disclosure is finalized or an examination has begun, taxpayers are no longer eligible to withdraw from VDP. The streamlined procedures do not absolve taxpayers of criminal liability if IRS Criminal Investigation determines their conduct was willful. If the violations were due to willful conduct, taxpayers should continue with VDP.
18. If a taxpayer received a conditional approval letter from the IRS Criminal Investigation division, but does not agree with the penalties to be assessed, what can they do?No penalty deviations will be permitted. Taxpayers are encouraged to consult a licensed professional or legal advisor or use IRS resources to understand applicable penalties before requesting the VDP clearance. If conditional approval is rescinded due to noncompliance, all applicable penalties may be asserted during a full examination.
19. How and when will a taxpayer know if the IRS has accepted their returns?Taxpayers will receive written confirmation once IRS processing is complete. Timing may vary depending on case complexity and payment verification. Taxpayers should retain all correspondence and confirmation notices for their records.