Should I Fully Disclose To the IRS? [infographic]

Taxpayers who fully disclose income and assets to the IRS can receive assistance through the Voluntary Disclosure Program, a federal program that’s designed to help taxpayers who face severe penalties.

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What should I Fully Disclose to the IRS

IRS Voluntary Disclosure Program

Under the IRS Voluntary Disclosure Program, taxpayers can get assistance with previously unreported tax liabilities.The program offers assistance to taxpayers who would otherwise face serious penalties, including criminal prosecution that could result in incarceration. A voluntary disclosure is often a deciding factor in decisions about criminal prosecution. To take advantage of the program, a taxpayer must be willing to cooperate with the IRS in determining his/her correct tax liability, which may involve a tax audit, then make arrangements to pay the tax owed plus interest and penalties. The IRS Voluntary Disclosure Program is not available to taxpayers who do not come forward on their own merit, nor does it protect taxpayers whose unreported income is from an illegal source.

The IRS Voluntary Disclosure Program offers assistance to qualifying taxpayers with unreported income and/or seriously delinquent tax returns.

Unreported Income

The United States punishes tax evasion more harshly than most countries. Taxpayers who are caught willfully cheating on their taxes face severe penalties. Federal sentencing guidelines state that someone who evades between $30,000 and $80,000 in taxes can be sentenced to 15 to 21 months in prison, without the benefit of parole. In addition, the taxpayer will still owe back taxes, interest, and penalties. In general, criminal prosecution is typically limited to cases with a minimum of $100,000 in total tax loss.

Delinquent Returns

Taxpayers with several years of delinquent tax returns may face serious penalties, including criminal charges and prosecution. Through the Voluntary Disclosure Program, taxpayers can file delinquent tax returns for a period of six years and make arrangements to pay tax liabilities, interest, and penalties. The IRS imposes a statute of limitations of six years on prosecution for delinquent tax returns.

If taxpayers voluntarily disclose unreported income or unfiled tax returns, strict guidelines must be followed. The voluntary disclosure must be made to the Criminal Investigation Office of the IRS, where it is evaluated by a special agent who determines accuracy and completeness. The evaluation process usually takes about 10 working days. If the taxpayer is accepted into the Voluntary Disclosure Program and fails to cooperate with the IRS or make required payments, he/she may be referred back to Criminal Investigations.

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