Because the IRS has limited investigative resources and cannot hope to detect and pursue more than a small percentage of non-filers or tax evaders, it is obviously in the government’s interest to encourage taxpayers who have violated U.S. tax laws to voluntarily file amended and delinquent returns. The IRS has for many years followed a policy under which voluntary disclosure is, technically, deemed a factor to be considered in the decision whether or not to initiate a criminal investigation or recommend prosecution. The IRS takes great pains to argue that the policy does not provide an “amnesty.” However, as a practical matter and in my professional opinion, it is nearly inconceivable that the IRS would recommend criminal prosecution of a person who made a voluntary disclosure that meets all the elements of the IRS’s Voluntary Disclosure Policy.
The IRS Manual makes it clear that the voluntary disclosure “policy” provides no legal or formal guarantee. It states: It is currently the practice that a voluntary disclosure will be considered with all the other factors in the investigation in determining whether criminal prosecution will be recommended. This voluntary disclosure practice creates no substantive or procedural rights for taxpayers, but rather is a matter of internal IRS practice . . .. A voluntary disclosure will not automatically guarantee immunity from prosecution; however, a voluntary disclosure may result in prosecution not being recommended.
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