Should You Wait for the Changes to Go Into Effect?
If you deliberately failed to report income, concealed foreign accounts, or claimed deductions you knew you were not entitled to, you should not wait for proposed IRS voluntary disclosure changes to get confidential legal advice. More favorable terms could affect the cost of correcting your tax problems. But waiting could also jeopardize your eligibility to make a timely voluntary disclosure, leaving you exposed to a criminal tax investigation, substantial civil penalties, and potentially incarceration.
Whether you should submit an application now requires a careful review of your circumstances. You need to know what the IRS may already know, whether your conduct creates criminal exposure, and what each available compliance option would require. At the Tax Law Offices of David W. Klasing, our dual-licensed Tax Attorneys and CPAs can evaluate those issues together before you make statements or submit documents to the government. Call (800) 681-1295 to schedule a confidential, reduced-rate consultation or contact us online HERE.
What Has the IRS Proposed for Voluntary Disclosure in 2026?
As of September 21, 2026, the IRS continues to describe its revised Voluntary Disclosure Practice, or VDP, as a proposal. Taxpayers should distinguish the existing practice from terms the agency has not yet put into effect. The IRS expressly cautions that its proposal does not create rights or expectations for earlier applicants before finalization and implementation.
The IRS’s December 2025 proposal generally contemplates a six-year disclosure period. It would require taxpayers to file the applicable amended or delinquent returns and reports, pay taxes, penalties, and interest in full, and execute required agreements within three months after conditional approval. For amended returns, the proposal calls for a 20% accuracy-related penalty for each year in the disclosure period. For delinquent returns, it calls for failure-to-file penalties without failure-to-pay penalties. Separate penalties would apply to delinquent or amended FBARs and international information returns. These are proposed terms, and final guidance could change them.
A lower headline percentage does not necessarily mean a lower total bill. Under the existing income tax framework, a cooperating taxpayer who submits six years of amended returns generally faces one civil fraud penalty on the year with the highest tax deficiency, without accuracy-related penalties on the other five years. Applying a different penalty across multiple years could produce a different result than you expect. Offshore reporting obligations, related entities, and other taxes can further complicate the calculation. Your attorney should compare the actual numbers and payment requirements before recommending a course of action.
Why Waiting Can Jeopardize Your Opportunity to Disclose
The IRS’s timeliness rules make delay consequential. A disclosure generally must precede an IRS civil examination or criminal investigation, or notice that the IRS intends to begin one. The opportunity can also close when the IRS receives third-party information alerting it to your noncompliance or obtains directly related information through an enforcement action. You cannot measure eligibility solely by whether an IRS Special Agent has contacted you.
Consider a business owner who deliberately omitted cash receipts for several years and decides to wait for a potentially cheaper disclosure process. If a former employee supplies records exposing those omissions in the meantime, the owner may lose access to VDP before receiving any personal warning. That possibility deserves more weight than an assumed penalty reduction. An attorney can assess known contacts, notices, and third-party developments, although no attorney can promise to know everything the government has obtained.
Cryptocurrency holders should take the same issue seriously. Covered brokers began reporting gross proceeds from 2025 digital asset transactions on Forms 1099-DA in 2026. Those reports do not automatically establish fraud or disqualify every recipient from voluntary disclosure. They do make it important to reconcile exchange information with prior returns and determine whether the IRS has information identifying specific noncompliance. Missing cost basis, transfers between your own wallets, and actual taxable dispositions require careful accounting analysis.
If an audit has already begun and your returns contain intentional misstatements, you may face an eggshell audit: a civil examination involving underlying conduct that could support criminal charges. At that point, counsel must evaluate the examination and your defense options based on the facts. Expectations about future VDP changes do not resolve that problem.
Does IRS Voluntary Disclosure Fit Your Situation?
VDP addresses willful tax noncompliance and related criminal exposure. It can apply to domestic income and offshore matters. The current practice requires truthful, complete disclosure and cooperation; it does not guarantee immunity from prosecution. The IRS also excludes illegal-source income under its current published eligibility rules. These limitations make legal screening essential before an application.
An omitted account or incorrect return does not automatically establish willfulness. Counsel should examine what you understood, what information you gave your preparer, and whether your conduct reflects a mistake, a good-faith misunderstanding, or intentional concealment. The dollar amount alone cannot answer those questions. Neither can a preparer’s reassurance that the IRS probably will not notice.
Taxpayers whose conduct was non-willful may have more appropriate options, including amended returns or, for qualifying offshore matters, the Streamlined Filing Compliance Procedures. Streamlined submissions require a truthful certification of non-willfulness and have separate eligibility requirements. A taxpayer who intentionally concealed income should not use a false certification to pursue lower penalties. Conversely, a taxpayer who made an innocent mistake should not assume a criminal voluntary disclosure is the right solution.
Filing amended returns also does not automatically place you in VDP. The practice requires a designated application process using Form 14457, including a factual narrative that the taxpayer signs under penalties of perjury. If your conduct may have been willful, counsel should evaluate the appropriate route and review that narrative against the records before you submit it. The objective is to correct the problem through a legally sound process while addressing the criminal exposure that prompted you to seek help.
What Should You Do Before Filing or Changing Course?
Start with an independent legal assessment. Your original CPA, enrolled agent, bookkeeper, or return preparer may have relevant information, but their involvement can also create conflicts or make them a witness. The federal tax-practitioner privilege under Internal Revenue Code Section 7525 does not extend to criminal tax matters. Attorney-client privilege can protect qualifying confidential communications for legal advice, but it does not automatically shield ordinary tax preparation or preexisting records.
Preserve bank statements, accounting files, exchange histories, prior returns, notices, and communications with advisers. Do not fabricate supporting documents, alter historical entries to conceal what happened, or delete records. Counsel can coordinate the accounting work needed to reconstruct income, identify affected entities and reporting obligations, and estimate potential liabilities. The proposed three-month completion and payment requirement makes advance preparation particularly important if the IRS retains that feature.
If you have already applied to VDP, your case stage matters. The IRS’s published proposal FAQs describe potential transition options for some applicants whose cases remain at an early stage. They also say that applicants whose VDP examinations have begun and who have responded to an examiner’s document request must remain in their existing version. Counsel should review the precise procedural history and any final transition guidance before you withdraw, change strategy, or stop responding.
Getting advice now lets you make an informed filing decision. It does not require you to rush an incomplete application. A proper review can identify whether current circumstances require prompt action, what preparation remains necessary, and whether any anticipated change could materially improve your position. Throughout that process, continue meeting current filing and payment obligations and promptly address deadlines with counsel.
Speak With a Criminal Tax Defense Attorney at the Tax Law Offices of David W. Klasing Today
At the Tax Law Offices of David W. Klasing, we combine criminal tax defense with the accounting analysis that voluntary disclosure demands. Our dual-licensed Tax Attorneys and CPAs can evaluate your potential willfulness, examine your records, assess disclosure eligibility, and compare the financial consequences of available approaches. We can then develop a strategy that addresses your legal exposure and the work necessary to bring you into compliance.
If you face an eggshell audit, an IRS Criminal Investigation contact, or concerns that a preparer or former business associate may expose past noncompliance, tell us at the outset. Those facts can change your options and how we communicate with the government. Our goal is to protect your rights, limit avoidable exposure, and pursue the best available resolution based on your circumstances.
Call the Tax Law Offices of David W. Klasing at (800) 681-1295 to schedule a confidential, reduced-rate consultation or contact us online. Before you wait for proposed IRS voluntary disclosure changes, benefit from an informed legal assessment. The decision deserves more than a prediction about future penalties when your finances, business, and freedom may be at stake.
