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Should You Use the IRS’ Voluntary Disclosure Practice if You are Behind on Your Federal Tax Obligations?

News, Offshore Account Update

Posted in on September 30, 2020

As a U.S. taxpayer, it is up to you to make sure you meet your obligations to the Internal Revenue Service (IRS) on time. This includes not only paying what you owe but making all requisite filings as well—even if they do not come with tax liability attached. If you fall behind on your federal tax obligations, using one of the IRS' “voluntary compliance” options can help mitigate your exposure; however, you need to be extremely careful in order to avoid increasing your risk of prosecution and penalization. With this in mind, it is important to work with an experienced Virginia tax attorney to decide on your best path forward.

What is the IRS' Voluntary Disclosure Practice?

While “voluntary disclosure” might sound fairly innocuous, the IRS' Voluntary Disclosure Practice is a high-risk option that should only be utilized in extreme circumstances. This is because, in order to utilize the IRS' Voluntary Disclosure Practice, you must effectively admit to committing a criminal violation of the federal tax code. If you do not believe that you are guilty of a tax crime, then you must choose an option other than the IRS' Voluntary Disclosure Practice, and you must ensure that the documentation you submit to the IRS does not lend itself to being interpreted as evidence of a criminal offense.

As IRS Criminal Investigations (CI) explains:

“CI takes timely, accurate, and complete voluntary disclosures under consideration when determining whether to recommend criminal prosecution. A voluntary disclosure will not automatically guarantee immunity from prosecution; however, a voluntary disclosure may result in prosecution not being recommended. . . .

“The Voluntary Disclosure Practice is a compliance option if you have committed tax or tax-related crimes and have criminal exposure due to your willful violation of the law. . . . If your violation of the law was not willful, you should consider other options . . . .”

What are the Alternatives to the IRS’ Voluntary Disclosure Practice?

If you have not willfully violated the law but you are nonetheless behind on your federal tax obligations, what are the alternatives to the IRS’ voluntary disclosure practice? Depending on the specific circumstances involved, options for self-disclosing federal tax violations include:

  • Amending your federal tax returns;
  • Submitting a delinquent return;
  • Utilizing the IRS' Streamlined Filing Compliance Procedures (for undisclosed offshore accounts);
  • Utilizing the FBAR or international information return submission procedures; and,
  • Seeking to negotiate a favorable resolution with the IRS.

Ultimately, the option you choose will need to reflect your individual circumstances, and you will need to make an informed decision based on the advice of legal counsel. If you have questions or concerns and would like to speak with a Virginia tax attorney, contact Thorn Law Group confidentially now.

Speak with Virginia Tax Attorney Kevin E. Thorn, Managing Partner of Thorn Law Group

Are you concerned that you may be behind on your federal tax payment or reporting obligations? Do you own offshore accounts that you have not disclosed to the IRS? To discuss your situation with Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, in confidence, call 703-752-3752, email ket@thornlawgroup.com or contact Thorn Law Group online today.

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