When the failure may have been willful, the Voluntary Disclosure Practice is the path that addresses criminal exposure. It is only open before the IRS has your name.
Taxpayers with unreported income or accounts whose conduct could be seen as willful come forward through IRS Criminal Investigation, pay the tax, interest, and a fraud penalty on the highest year, and in return the IRS generally does not recommend prosecution. It is expensive compared with the streamlined procedures, and it is the only program designed to resolve criminal risk. Timing decides eligibility.
When this is the right program
The practice fits when the income came from legal sources, the failure to report may have been willful, and the IRS has not yet begun an examination or investigation or received information about you from a third party such as a summons return or a whistleblower. Once any of those has happened, the practice is closed.
If the failure was not willful, the streamlined procedures are less expensive and usually the right choice. Choosing between them is a legal judgment about intent, made under attorney-client privilege, and it should be made before anything is filed or said to anyone, including an accountant.
Results depend on the facts of each matter and are not a prediction of the outcome in your case.
The IRS programs for foreign accounts, compared.
How the engagement works
Exposure review
An attorney reviews the facts under privilege and, where needed, engages an accountant under a Kovel arrangement so the reconstruction is protected. This is where the willful-or-not decision is made.
Preclearance
Form 14457 Part I is submitted to IRS Criminal Investigation to confirm you are eligible and the disclosure is timely. Nothing substantive is disclosed at this stage.
Disclosure and resolution
Part II provides the full disclosure. Returns for the disclosure period, typically six years, are filed; tax, interest, and a fraud penalty on the highest-tax year are paid; and the civil examination that follows is handled by the same attorney.
The firm handles disclosures for foreign accounts, cryptocurrency, and domestic unreported income, and represents clients in the examinations that follow. Read the full guide to the Voluntary Disclosure Program.
Questions people ask first
No program can. The IRS states that a timely, complete, and cooperative disclosure will generally result in a recommendation against prosecution, and that has been the practice for decades. It is the strongest protection available to a taxpayer with willful exposure, and it depends on completeness and timing.
Tax and interest for the disclosure period, a 75 percent civil fraud penalty on the year with the highest tax, and for foreign accounts a 50 percent FBAR penalty on the highest balance, though the IRS can apply lower penalties in the right facts. Fees are quoted after the review, because the scope is known only then.
Then the practice is closed, and the matter is an examination or an investigation to be defended. The first call is still to an attorney; do not respond to the IRS before that conversation.
Only if the failure was non-willful, and certifying that under penalty of perjury when the facts say otherwise makes the situation worse. The consultation is where that judgment is made, before anything is filed.
Yes. The practice applies to unreported crypto income the same way, and the IRS has said it may follow up on Letter 6173 and summons data with enforcement. Coming forward before that contact is what keeps the door open.
Schedule a confidential consultation
Bring the account statements and the returns you have. The attorney tells you which program fits, what it costs, and what to do first, whether or not you hire the firm.
