Understanding the Voluntary Disclosure Policy of the IRS

voluntary disclosure program

Why you are still criminally liable for non-compliance even if the IRS hasn’t noticed for years

It is not uncommon to see a client with a heavy heart walk into your office as a tax defense attorney. In most cases, such clients have not been remitting their taxes to Uncle Sam and they want to come clean but do not know how. The good news is that you can come clean and avoid criminal charges under the voluntary disclosure policy. The government, through the IRS, has a voluntary disclosure policy that allows taxpayers to come clean and escape prosecution in exchange for their cooperation and truthfulness in paying owed taxes.

Potential criminal penalties that you may face

Although it is true that more people cheat than those that are caught, the US has been known to punish tax evaders more severely than other countries. For example, those caught evading between $30,000 to $80,000 in taxes can receive a sentence of up to 21 months in prison. This is without any benefit of parole. Furthermore, they will still have to incur the interest, back taxes and even penalties.

Most people who evade taxes live with the fear that the IRS will find out about their dishonesty. This often turns into a paralyzing fear that prevents people from tackling such issues. However, the IRS has been known to be quite forgiving if a taxpayer can simply disclose that they failed to report all their income. Taxpayers who voluntarily disclose non-compliance do this in return for a consideration from the IRS in determining whether they will still face criminal charges. Since the IRS still collects the penalties and back taxes, most people get a good deal that sees their charges dropped.

When you should make a voluntary disclosure

Like most things in the legal realm, it is necessary to ensure that voluntary disclosure is timely for it to be effective. If a person is aware of an investigation or encountered some circumstances that reveal the government is already pursuing them then the disclosure is not timely. What then does the IRS consider to be a timely voluntarily disclosure?

  • The disclosure should be before any IRS examination or even before the IRS notices the taxpayer that there is a looming audit.
  • The disclosure ought to be revealed before a whistleblower supplies information to the IRS with regards to fraud or any other non-compliance issue.
  • A voluntary disclosure should also be before the IRS gets any information about noncompliance through any other means.

While the importance of timing cannot be understated, it is also important to ensure that other circumstances are right when disclosing such information. There are instances where a voluntary disclosure may not be effective. In the event of illegal sources of income, for example, a disclosure may prove ineffective. It is also critical for the taxpayer to understand how the IRS will perceive their behavior and circumstances before they make a voluntary disclosure.

Get an experienced tax defense attorney to walk you through this process

Since there are a lot of circumstances involved in making your criminal charges dropped when you make a voluntary disclosure, it is important that you hire the services of a qualified tax attorney. Failure to do so may land you in trouble.  If you need help or advice, contact the attorneys at Ayar Law for free, no-obligation, tax advice! 800.571.7175



Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.