What are the Risks of Using the IRS’ Voluntary Disclosure Practice?

The IRS’ Voluntary Disclosure Practice is a “compliance option” for U.S. taxpayers who are at risk for federal prosecution due to the commission of tax crimes and certain tax-related offenses. If you believe that you may be guilty of a federal crime, taking advantage of the Voluntary Disclosure Practice could be a good option. However, there are major risks involved in voluntarily disclosing criminal activity to the IRS; and, in order to protect yourself, you will need to rely on the advice of an experienced Maryland voluntary disclosure attorney.

5 Risks of Voluntarily Disclosing Criminal Activity to the IRS

Before deciding to voluntarily disclose information about a tax crime or tax-related offense to the IRS, it is important to be aware of the risks involved. These risks include:

1. Voluntary Disclosure Does Not Guarantee Immunity from Prosecution

First and foremost, voluntary disclosure does not guarantee immunity from prosecution. Rather, if IRS Criminal Investigations (IRS CI) accepts your voluntary disclosure, then this, “may result in prosecution not being recommended.” IRS CI considers various factors in deciding whether to recommend prosecution, and this means that there are various factors you need to consider as well.  

2. Voluntary Disclosure Does Guarantee that IRS CI Will Know You Committed a Crime

While voluntary disclosure does not guarantee immunity, it does guarantee that IRS CI will know you committed a crime. Once you disclose information to IRS CI, there is no “taking it back,” and you will need to be prepared to deal with IRS CI through the final resolution of your case.

3. Even if You are Not Prosecuted, You Will Still Need to Pay What You Owe

When you make a voluntary disclosure to IRS CI, you need to be prepared to pay what you owe. Making “good faith arrangements” to pay is a condition to participating in the Voluntary Disclosure Practice; and, if you do not follow through, you will be at risk for criminal prosecution.

4. If You are Prosecuted, You Will Be Facing Substantial Fines and Prison Time

Tax crimes and tax-related offenses carry substantial penalties under federal law. For example, under 26 U.S.C. Section 7201, federal tax evasion carries a fine of up to $100,000 ($500,000 for business entities) and up to five years of federal imprisonment.

5. It May Already Be Too Late

If IRS CI already has incriminating information against you, then it is too late for you to make a voluntary disclosure. Likewise, if IRS CI has initiated a civil examination or criminal investigation, it will not make a recommendation against prosecution based on your subsequent voluntary disclosure.

Request a Confidential Initial Consultation at US International Tax Advisors

Our firm represents Maryland residents and businesses in federal criminal tax matters. If you need to protect yourself against federal prosecution, you can call US International Tax Advisors, at 844-796-8565 or contact us online to speak with him in confidence.