When Is It Too Late to Submit a Voluntary Disclosure to the IRS?

The IRS’ Voluntary Disclosure Practice provides a pathway to avoid criminal prosecution when you have willfully violated federal law. But strict eligibility requirements apply—including strict timelines. Even if you don’t know you are no longer eligible, submitting a voluntary disclosure too late lets the IRS use it against you.

Willfully violating the Internal Revenue Code—or any other statute that falls within the IRS’ enforcement jurisdiction—can lead to serious federal criminal charges. Tax evasion, tax fraud, offshore disclosure violations, and other relevant criminal offenses carry substantial fines and prison time under federal law. If you risk criminal prosecution, discuss your options with an experienced Texas criminal tax lawyer as soon as possible.

In this scenario, one option may be to submit a voluntary disclosure to the IRS.

The IRS’s Voluntary Disclosure Practice (VDP) offers an opportunity to proactively resolve willful tax law violations without facing criminal charges. For taxpayers who have willfully violated federal law, submitting a voluntary disclosure is often the best path forward—provided they act in time. However, submitting a voluntary disclosure does not guarantee immunity from prosecution; and, if a taxpayer comes forward too late, they will be ineligible for the protections that might otherwise be available.

3 Key Requirements for Submitting a Timely Voluntary Disclosure

The IRS has established three timing-related requirements for submitting a voluntary disclosure under the VDP. To be considered timely (and to be considered “voluntary”), a disclosure must satisfy all three of these requirements:

1. Taxpayers Must Come Forward Before the IRS Opens an Audit or Investigation

Taxpayers are ineligible to submit a voluntary disclosure once the IRS opens an audit or investigation. If you are facing scrutiny from the IRS—even if you are not yet aware that you are facing scrutiny from the IRS—it is too late to seek protection from criminal prosecution under the VDP.  

2. Taxpayers Must Come Forward Before the IRS Obtains Relevant Information from a Third Party

Taxpayers are also ineligible to submit a voluntary disclosure once the IRS obtains relevant information from a third party. This includes information obtained from informants, whistleblowers, and alleged co-conspirators, among others.

3. Taxpayers Must Come Forward Before the IRS Obtains Relevant Information from Another Agency

Likewise, if the IRS has obtained relevant information from another law enforcement agency (i.e., the U.S. Department of Justice (DOJ) or the U.S. Securities and Exchange Commission (SEC)), this also terminates a taxpayer’s eligibility to submit a voluntary disclosure.

In many cases, taxpayers have no way of knowing whether they are still eligible to submit a voluntary disclosure—other than contacting the IRS. If you hire a Texas criminal tax lawyer to represent you, your lawyer can engage with the IRS on your behalf and determine whether you still have time to file. This requires a cautious approach, so it is imperative to engage legal counsel with specific experience in this high-stakes area of federal tax compliance.

Additional Requirements for Submitting a Voluntary Disclosure to the IRS

While taxpayers must satisfy each of these timing requirements in order to qualify for the IRS’s Voluntary Disclosure Practice, these are not the only requirements that apply. To participate in the VDP, taxpayers must also meet several other substantive and technical filing requirements. These include (but are not limited to):

• Timely submit Part I of IRS Form 14457, IRS Form 2848, and all other required documentation
• If you receive “preclearance” from the IRS, submit Part II of IRS Form 14457
• Provide a statement “acknowledging your willful failure to comply with tax or tax-related obligations”

Additionally, when participating in the VDP, taxpayers “must cooperate” with the IRS’ requests for additional documents and information and work with the IRS to determine their correct tax liability. Failure to cooperate as required can lead the IRS to recommend prosecution instead of continuing to work toward a mutually agreeable settlement.

FAQs: Submitting a Voluntary Disclosure to the IRS

When should taxpayers consider submitting a voluntary disclosure to the IRS?

Taxpayers should consider submitting a voluntary disclosure to the IRS when they have willfully violated their federal obligations, and they are not yet facing federal scrutiny. In this scenario, submitting a voluntary disclosure can provide a pathway to avoid federal criminal charges.

Are there risks involved with submitting a voluntary disclosure?

Yes, submitting a voluntary disclosure involves risks. While participating in the IRS’ Voluntary Disclosure Practice can result in prosecution not being recommended, this outcome is not guaranteed. As a result, taxpayers considering a voluntary disclosure must make an informed decision based on the advice of experienced legal counsel.

Are there alternatives to submitting a voluntary disclosure?

The options available in any particular case depend on the circumstances. For example, if your violation was not willful, you may be eligible to submit a streamlined filing instead of a voluntary disclosure. Conversely, if you are already the focus of an audit or investigation, your options may be limited to negotiating a settlement with the IRS or preparing to fight the IRS’ case in court.

How Brown PC Can Help

At Brown PC, we have extensive experience representing U.S. taxpayers in high-stakes federal tax controversies. If you risk criminal prosecution, we can help you make an informed decision about whether to come forward through the IRS’s Voluntary Disclosure Practice. Contact us to learn more.

Request a Consultation with Texas Criminal Tax Lawyer Lawrence Brown

If you need to speak with a lawyer about coming forward through the IRS’ Voluntary Disclosure Practice, we invite you to get in touch. To request a confidential consultation with Texas criminal tax lawyer Lawrence Brown, call us at 888-870-0025 or tell us how we can reach you online today.