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To others, it comes as an issue of procrastination or a mere slip-up in filing the taxes. The case is much more grievous among others. It is the outcome of a deliberate act, an effort to defraud through an intentional overreporting, concealment of assets, or not filing. This is what the IRS refers to as willful non-compliance, and this may end up giving you sleepless nights as you are looking over your shoulder.

In such a position, you might be a prisoner who is convinced that it is now too late to set things straight. However, the IRS offers a legitimate way out. It is known as the Voluntary Disclosure Program (VDP), and it is a very important lifeline that is intended to take the taxpayer out of the shadows and into compliance, which is mostly achieved by shielding them against the worst of all, which is being prosecuted by the criminal courts.

Our lawyers have taken clients through this strenuous and high-stakes procedure at Leading Tax Group. It is not the easy way, but it is a way. Here is what you need to know.

This is the distinction that is the most significant to learn. IRS has various programs regarding various forms of non-compliance.

This is the action that occurs in cases of negligence, inadvertence, or good-faith misinterpretation of law. In case you truly did not realize that there was a filing under obligation (such as a foreign bank account), you could be eligible under other, less strict options, such as the Streamlined Filing Compliance Procedures.

This is the kind of violation that is made deliberately and voluntarily, as well as a known legal obligation. Some of them are intentional not filing a tax return, maintaining a second set of books regarding your business, deliberately not including all of your income, or putting money in offshore accounts.

When your behaviour is categorized as willful, then it is probable that the only program that could save you in the event of criminal indictment is the Voluntary Disclosure Program.

It has been claimed that the VDP is an old tradition of IRS Criminal Investigation (CI)- the law enforcement arm of the IRS. That itself should speak volumes about the seriousness this is given.

It is not a program of amnesty. You will not get a “free pass.” You will have to make restitution for taxes, heavy fines, and interest.

So, what is the benefit? Your honesty, fully and promptly reporting information to IRS-CI, would reflect well on your cooperation in the decision on whether criminal prosecution is recommended. Although not a sure-footed immunity grant, a well-executed voluntary disclosure has proved to be the most efficient tool for avoiding criminal tax charges in the past.

Let us be clear: the intentional (also known as willful) tax evasion is a federal felony. An insider conviction may entail stiff sanctions, such as a prison sentence and huge fines.

By becoming a member of the VDP, IRS-CI commits to civilly settling the case. It implies that the risk of a criminal prosecution is put over the threshold, and the case is reduced to a calculation and a payment of what is due. You are bargaining for the monetary punishments (which can be negotiated) in exchange for your freedom. This tranquility is the major aim of the program.

In order to qualify, you must disclose:

You are required to attend the IRS prior to their reaching you. In case the IRS has already started a civil audit or a criminal investigation, it is too late. You also might fail to qualify in case a third party (such as an informant or a bank) has told you about your non-compliance.

You should report all non-conformity activities. You are not able to choose and tell what to tell. Any effort to withhold the information shall be a nullity to the disclosure and put you in the path of being prosecuted, the very thing you are attempting to prevent.

It is a program concerning tax non-compliance of taxable, legally-earned income. Income earned through illegal transactions (i.e., drug trafficking, money laundering) will not be protection under the IRS.

You need to agree to cooperate with the IRS in ascertaining your full taxable value and to make a good-faith effort to pay the sums of taxes, interest, and penalties in their entirety.

The reason you should never place yourself in voluntary disclosure is that.

This is not a DIY project. It is a high-stakes court case initiated by the IRS Criminal Investigation. This is extremely dangerous to attempt to negotiate this without the help of a skilled tax attorney.

An attorney will conduct a diligent investigation prior to filing your report to make sure that it is complete, accurate, and formatted in the most preferred manner. A partial disclosure is an unsuccessful disclosure.

There is the most crucial step to decide to come forward. The second is the selection of the appropriate legal counsel to be on the frontline.

Submission of past tax returns is usually termed as peaceful disclosure. It is very dangerous in case your failure to comply was willful. A mute confession does not guard you against a criminal charge. Even when you are charged, the IRS was unable to find out about your actions before they reviewed your returns, which you quietly just filed, you could still be charged. The VDP represents the sole, officially approved procedure by the IRS to declare the intentional behavior and to be shielded against the charge of a crime.

The IRS demands that you take good-faith arrangements to make payment. Although it is the easiest way of payment, it is not the only one. The fact that you are struggling to pay immediately does not disqualify you. Another aspect of the entire civil resolution following the close of the criminal portion of the case is the ability of an experienced tax attorney to negotiate payment options, either in the form of an Installment Agreement or, in some instances, an Offer in Compromise.

The fines are substantial. Mostly, though they may differ, you may usually expect:

• The amount of back taxes to be disclosed usually covers the past six years.
• Interest on the unpaid taxes.
• A civil fraud penalty (75% of the tax due), or a fraudulent failure-to-file penalty (15% per month, to a maximum of 75).

Other fines, including those for a willful failure to file an FBAR (Report of Foreign Bank and Financial Accounts), might also be used. Although these punishments are harsh, they are entirely financial and much better than serving a jail sentence.