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What is the Difference Between the IRS’ Voluntary Disclosure Practice and Its Streamlined Filing Compliance Procedures?

Offshore Account Update

Posted on September 30, 2020 |

When you fall behind on your federal tax obligations, voluntarily coming into compliance can save you from substantial penalties and the risk of criminal prosecution for federal tax evasion or tax fraud (or both). However, while the Internal Revenue Service (IRS) offers various “voluntary compliance” options for delinquent taxpayers, these options both (i) offer different benefits, and (ii) are available under different circumstances. As a result, when seeking to come into compliance, you need to make informed decisions, and it is important to rely on the advice of an experienced New Jersey IRS lawyer.

Voluntary Compliance Options for Failure to Timely Disclose Offshore Accounts

One issue that tends to be particularly confusing for many U.S. taxpayers is the difference between the IRS’ Voluntary Disclosure Practice and its Streamlined Filing Compliance Procedures for disclosing offshore accounts. Here, New Jersey IRS lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains what taxpayers need to know:

Q: What is the IRS’ Voluntary Disclosure Practice?

The Voluntary Disclosure Practice is a program maintained by IRS Criminal Investigations (IRS CI) that affords the opportunity for U.S. taxpayers to avoid criminal prosecution by coming forward with information about their own federal tax law violations. As IRS CI explains, “The Voluntary Disclosure Practice is a compliance option if you have committed tax or tax-related crimes and have criminal exposure due to your willful violation of the law. Taxpayers who participate in the Voluntary Disclosure Practice intend to seek protection from potential criminal prosecution.”

Q: What are the IRS’ Streamlined Filing Compliance Procedures?

The IRS’ Streamlined Filing Compliance Procedures are specific to untimely disclosure of offshore accounts. It is intended for use in situations in which taxpayers have unknowingly failed to meet their federal income tax reporting obligations. As the IRS explains, “[t]axpayers using either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures, will be required to certify . . . that the failure to report all income, pay all tax and submit all required information returns . . . was due to non-willful conduct.”

Q: What are the Key Differences Between the Voluntary Disclosure Practice and the Streamlined Filing Compliance Procedures?

There are several key differences between the Voluntary Disclosure Practice and the Streamlined Filing Compliance Procedures. Most notable, however, is the Streamlined Filing Compliance Procedures’ limited application to non-willful conduct. If a taxpayer attempts to obtain relief through the Streamlined Filing Compliance Procedures and the IRS determines that the taxpayer’s untimely disclosure was willful, then the federal government can pursue criminal charges.

Q: How Do I Choose Between the Voluntary Disclosure Practice and the Streamlined Filing Compliance Procedures?

In order to choose between the IRS’ Voluntary Disclosure Practice and its Streamlined Filing Compliance Procedures, you will need to discuss your situation in detail with an experienced IRS tax lawyer. You should do this promptly, as securing protection under either program requires you to make your voluntary disclosure before the IRS discovers your noncompliance through other means.

Request a Confidential Consultation with New Jersey IRS Tax Lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group

Do you have concerns about being penalized by the IRS due to failing to timely disclose your offshore accounts? If so, we encourage you to get in touch. To request an appointment with New Jersey IRS tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call 201-842-7696, email ket@thornlawgroup.com or contact us online today.


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