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Every year, Santa Barbara taxpayers either fail to file taxes or intentionally underreport their taxable income. This is an accident for some, but for others, it is not. In either case, you have several options for rectifying the situation and reporting your accurate income for tax purposes. You can file amended tax returns with more precise information, which could be viewed as a criminal admission, or make a domestic or offshore voluntary disclosure if you wish to receive a nearly guaranteed pass on criminal tax prosecution where you originally fudged the numbers. While both choices will help you fix your incorrect tax information, they come with different levels of risk and potential civil and criminal tax consequences.

Is Voluntary Disclosure My Best Option to Avoid Criminal Tax Prosecution?

A domestic or offshore voluntary disclosure is safer, depending on your facts and circumstances. Depending on how much money you owe because of amending your tax returns, you could be looking at severe criminal tax exposure. If, after amending, you owe $30,000 or more in back taxes, $30,000 of tax loss is akin to one year in jail under the federal sentencing guidelines. This fact makes the federal government much more likely to prosecute if the government believes you committed tax fraud with the original tax returns, as they will be getting the headlines they seek. They seek to create a deterrent effect on similarly situated taxpayers when they publicize the prosecution. However, entering into a domestic or offshore voluntary disclosure will help you avoid the risk of criminal prosecution altogether, especially where your experienced and highly trained dual-licensed Criminal Tax Defense Attorney and CPA ensure that you strictly comply with the terms of the program.

Why Should I Choose the Tax Law Offices of David W. Klasing?

At the Tax Law Offices of David W. Klasing, our dual-licensed Santa Barbara Voluntary Disclosure Attorneys and CPAs offer experienced guidance through the IRS Voluntary Disclosure Practice (VDP). This program is crucial for individuals in Santa Barbara who have willfully understated their Federal tax liabilities. It provides a systematic and secure avenue to rectify their tax status while avoiding criminal tax prosecution. Similarly, the State of California’s Franchise Tax Board (FTB) and the California Department of Tax and Fee Administration (CDTFA) provide methods for non-compliant taxpayers in Santa Barbara to regain compliant status by coming forward with the details of their failure to comply with the California state tax code. The path to voluntary disclosure to the FTB depends on whether you are an in-state or out-of-state filer. We are dedicated to assisting in making sincere, comprehensive, and timely disclosures to the IRS and California state tax authorities, which includes arranging for the payment of owed taxes, interest, and penalties and cooperating with the tax agencies to determine the correct tax liability.

Understanding the DOJ’s Voluntary Self-Disclosure (VSD) Pilot Program

The DOJ’s Voluntary Self-Disclosure (VSD) Pilot Program, launched on April 15, 2024, is designed to encourage individuals to disclose corporate misconduct. Under this program, those who voluntarily provide original, truthful information before any government inquiry can potentially receive a Non-Prosecution Agreement (NPA). Eligibility requires full cooperation with the DOJ, including giving evidence and testimony and agreeing to forfeit any profits from the wrongdoing. CEOs, CFOs, and individuals with particular criminal histories are excluded from the program.

This initiative emphasizes the importance of proactive compliance and robust internal reporting mechanisms. Companies should review and enhance their compliance policies, foster a culture of ethical behavior, and ensure employees trust internal reporting channels. By participating in the VSD Pilot Program, individuals can avoid severe penalties and criminal tax prosecution, while companies can mitigate risks and uphold their reputations.

Previously, the Income Tax Division of the Department of Justice’s (DOJ’s) Corporate Voluntary Self-Disclosure Policy aimed to promote corporate tax compliance. The policy offered incentives to companies that voluntarily disclose potential violations of federal tax laws and cooperate with the Internal Revenue Service (IRS) in resolving such issues in exchange for what practically amounts to an amnesty for the corporation but not necessarily for the wrongdoer employees, owners, and directors of the entity. Yes, a corporation can be criminally prosecuted as a separate legal being.

For help making a voluntary corporate self-disclosure to the DOJ Income Tax Division or participating in the Voluntary Self-Disclosure (VSD) Pilot Program, contact our experienced dual-licensed Santa Barbara Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing. Call 805-200-4053 or schedule a reduced-rate initial consultation here at our Santa Barbara office or one of our other convenient locations across Southern California. 

Am I Eligible for the Voluntary Disclosure Practice (VDP)?

Three main aspects of a submission to the VDP determine eligibility. First, the undisclosed funds in question must have been legally earned. This requirement prevents taxpayers from using the Internal Revenue Service (IRS) to launder illegally acquired money. For example, imagine someone sold illegal narcotics in South America and kept their money in a foreign bank account. That person cannot use the IRS disclosure program to report their money because the funds can be “cleaned” through the disclosure process.

Furthermore, under the VDP, taxpayers cannot issue placeholder submissions. A placeholder submission is used to hold a spot open for a taxpayer. The VDP does not permit these types of submissions. Accordingly, those reporting to the VDP must present their total submissions. In other words, you must submit all foreign assets, accounts, investments, and especially unreported foreign income.

Assessing eligibility for a VDP submission, especially whether a taxpayer’s behavior was willful, is a complex task that only an Attorney should undertake. If you believe you need to make such a submission, you should contact our attorneys immediately. Our dual-licensed Santa Barbara Voluntary Disclosure Attorneys and CPAs skillfully navigate the complexities of various federal and California state voluntary disclosures, including domestic, offshore, CDTFA, and FTB voluntary disclosures, streamlined procedures, and delinquent FBAR and international information return submission procedures. 

Whether we are providing tax audit representation, or non-filer assistance – FBAR consulting services, assistance with voluntary disclosure – entity formation advice, or legal guidance on corporate tax compliance – our accomplished, award-winning tax team takes pride in delivering a superior level of service and commitment to each of the businesses and individuals we work with. We stay ahead of the curve on the latest economic and legislative developments, from cryptocurrency regulation to impacts of the TCJA, to help give you and your business better tax and financial insights.

As long as a taxpayer in Santa Barbara who has willfully committed tax avoidance (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax non-compliance through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation/prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.

Get Back into Tax Compliance without Facing Criminal Tax Prosecution in Santa Barbara with our dual-licensed Voluntary Disclosure Attorneys and CPAs

If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or California state tax compliance without facing criminal prosecution.

Furthermore, If you are worried that you did not comply with reporting requirements regarding your offshore bank & financial accounts, especially where you have offshore taxable income-generating assets that went unreported for tax purposes, seek assistance from our experienced Dual-Licensed International Tax Lawyers & CPAs by calling our Santa Barbara office at 805-200-4053 to arrange a reduced rate initial consultation or scheduling online here.

In addition to our fully staffed 19,700 square foot penthouse office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad, Sacramento, Las Vegas, Nevada; Salt Lake City, Utah; Phoenix, Arizona, Albuquerque, New Mexico. We also have virtual offices in New York, New York; Miami, Florida; Austin, Texas; and Washington, D.C.

Our Santa Barbara office is conveniently located at:

7 W Figueroa St Ste 200 & 300 

Santa Barbara, CA 93101 

805-200-4053

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