What is Required to Make a Valid Voluntary Disclosure with the IRS?

At the Tax Law Office of David W. Klasing, our California tax attorneys occasionally receive correspondence from concerned taxpayers whose voluntary disclosures have been rejected by the IRS. Unfortunately, this issue is both common and serious enough to warrant closer examination. In this article, our voluntary disclosure attorneys will explain what a voluntary disclosure is, go over some of the basic requirements for successful submission of an IRS voluntary disclosure, and perhaps most importantly, discuss what to do if your voluntary disclosure submission is denied. No matter which of these stages you have reached – whether you are still weighing making a disclosure, or your submission has already been declined by the IRS – an IRS tax lawyer can facilitate the process while limiting criminal tax exposure.

What is an IRS Voluntary Disclosure?

Infamous for its complexity, the federal tax code (Internal Revenue Code) is often misunderstood by taxpayers. This leads to thousands of errors each tax season – of both the intentional and unintentional variety. Whether due to willfulness or negligence, numerous taxpayers fail to report income, fail to pay their tax liabilities, or make similar errors. In the meantime, interest continues to accrue on the unpaid amount due and owing, while in addition, the IRS can impose costly civil penalties.

Eligible taxpayers can resolve such issues – and in the process, minimize the risk of eggshell audits, criminal tax investigations, or federal felony prosecution – by making a voluntary domestic disclosure to the IRS. The catch is that the IRS sometimes declines voluntary disclosure submissions – which, moreover, are not necessarily appropriate for every taxpayer’s situation. For personalized tax guidance, it is always in your best interests to consult a knowledgeable and trustworthy criminal tax defense lawyer.

What Are the Requirements to Make a Voluntary Disclosure to the IRS?

Your voluntary disclosure must meet various requirements in order to be acceptable to the IRS. These requirements include, but are not limited to, the following:

• The disclosure must be “timely.” This means you must make the disclosure before you are contacted by the IRS regarding a tax audit or criminal investigation (or, even if you are not notified of a criminal tax investigation, before the IRS detects fraud). If you have already been contacted by the IRS concerning a criminal investigation, not only should you immediately contact a tax evasion defense attorney – you should also avoid filing any amended returns, which could actually be used as evidence against you in a criminal case.
• You must have made “good faith” efforts to pay what you owe the IRS. Tax debts can be costly, and many taxpayers have limited ability to pay upfront. To address these taxpayers, the IRS offers various payment plan and installment agreement options. In other words, the IRS expects even financially strained taxpayers to make sincere, reasonably diligent efforts to pay within the best of their ability. This is what is meant by making a “good faith effort” to satisfy one’s federal tax liabilities, including interest charges and IRS penalties. Along similar lines, the taxpayer is expected to cooperate with the IRS, which means complying with directives and providing requested information.
• The disclosure must be truthful, complete, and accurate. Omitting or distorting information will cause your submission to be rejected (and moreover, spur an IRS tax audit or investigation for tax evasion). It can also lead to a criminal prosecution even where a voluntary disclosure has been made as this would invalidate the voluntary disclosure.

What to Do if the IRS Rejected Your Voluntary Disclosure Submission

If you are at risk of criminal tax prosecution, it may be tactically advantageous to attempt a voluntary disclosure, even where you were initially rejected which could potentially (1) convince the government not to prosecute you for tax crimes (called “declination”), or (2) in the event that you are prosecuted and convicted, encourage the judge to impose a more lenient sentence through your cooperation.

The IRS may decline your voluntary disclosure submission if it does not meet the requirements discussed in the previous section. Though several alternative strategies may be feasible, it is critical to weigh your options with a tax attorney in order to determine which course of action is most viable (and least hazardous).

Our IRS Tax Attorneys Can Help You Make a Voluntary Disclosure in California, The U.S. and Offshore.

The IRS recently announced new guidelines for both domestic and offshore voluntary disclosures. Not only do the updated procedures create unfamiliar, difficult-to-navigate terrain for taxpayers – they also increase tax fraud penalties, heightening the danger for taxpayers who have acted willfully. If you willfully or negligently failed to file or pay taxes on domestic or foreign income, it is urgent that you consult an experienced tax attorney, like David W. Klasing, founder of the Tax Law Office of David W. Klasing. To schedule a reduced-rate, confidential tax consultation, contact us online right away, or call our main office in Irvine at (800) 681-1295.

Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.

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Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company?  Absolutely not!  See our policies that address this issue here: