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Posted by Jim McClaflin, EA, NTPI Fellow, CTRC

Why apply for the IRS voluntary Disclosure Program

Why apply for the IRS voluntary Disclosure Program

Taxpayers have the opportunity to come forward and voluntarily address their tax noncompliance through the IRS Voluntary Disclosure Program. This article examines the advantages of taking part in the program and the reasons why people or businesses might decide to apply. The IRS Voluntary Disclosure Program provides several benefits for taxpayers looking to address their tax compliance issues, from reducing penalties to avoiding criminal prosecution, gaining control over the procedure, protecting reputation and future opportunities, and achieving peace of mind.

Reduction of Penalties

Participating in the IRS Voluntary Disclosure Program has many benefits, one of which is the possibility of penalty reduction. Taxpayers who voluntarily disclose their unpaid tax liabilities may be able to bargain for lower fines than would be assessed during a typical IRS audit or investigation. Taxpayers are still required to pay any unpaid taxes, but the program gives them the chance to lessen their financial burden by requesting penalty reduction or other advantageous arrangements. Taxpayers who take part in the program have the opportunity to lessen the financial consequences of their noncompliance, giving them a more manageable path to resolving their tax problems.

Avoidance of Criminal Prosecution

Being able to escape criminal prosecution for intentional tax fraud or evasion is another compelling argument in favor of the IRS Voluntary Disclosure Program. People can express their willingness to make amends and work with the IRS by voluntarily coming forward and admitting their tax violations. This proactive approach can lessen the likelihood of being charged with a crime, which could result in serious penalties like fines and possible imprisonment. By taking part in the program, taxpayers have the chance to deal with their tax problems devoid of the worry and ambiguity that come with criminal investigations and give them the opportunity to resolve their noncompliance through civil channels.

Control Over the Process

Taxpayers gain control over the process of resolving their tax noncompliance through voluntary disclosure. Taxpayers have the option to proactively begin the disclosure process rather than waiting for the IRS to learn of their noncompliance via other means. By taking this proactive measure, people and companies can gather the necessary data, records, and paperwork to provide to the IRS, ensuring a thorough and well-organized submission. This degree of control gives taxpayers the freedom to handle their tax problems as they see fit, minimizing the risk of unpleasant surprises, extra scrutiny, and possibly harsher penalties that might result from being discovered by the IRS on their own.

Preservation of Reputation and Future Opportunities

By taking part in the voluntary disclosure program, one can protect their reputation and future opportunities for themselves or their company. Taxpayers show good faith and a commitment to following the law by voluntarily admitting and correcting their tax noncompliance. This proactive approach can lessen potential harm to their reputation on a personal or professional level. Regaining the trust and confidence of any stakeholders, customers, or business partners who might be impacted by the noncompliance can be accomplished by publicly addressing and resolving any tax issues. Maintaining a spotless tax compliance record also improves opportunities in the future, such as obtaining loans, partnerships, or government contracts, as companies typically prefer doing business with people and entities that have a history of compliance.

Peace of Mind and Closure

One of the most significant advantages of participating in the Voluntary Disclosure Program is the peace of mind and closure it offers. Dealing with unresolved tax compliance issues can be a constant source of stress and uncertainty. By proactively addressing and resolving these issues through voluntary disclosure, taxpayers can achieve peace of mind, knowing that they have taken steps to rectify their noncompliance. 



Jim McClaflin, EA, NTPI Fellow, CTRC
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