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When to File a Domestic IRS Voluntary Disclosure


Posted in on December 31, 2018

Failure to file tax returns that include all income earned in the United States is illegal and could lead to sanctions, including fines, penalties and even incarceration, depending on the severity of the non-compliance.

Filing an Internal Revenue Service Voluntary Disclosure is a way to come clean with the IRS regarding any unreported income. While a Maryland tax lawyer can explain all the pros and cons of filing a disclosure, the following provides some preliminary information about the program.

Why Make an IRS Voluntary Disclosure?

If you have unreported U.S. income, you could be criminally or civilly investigated and end up subjected to an IRS audit or special agent investigation. You could even end up prosecuted by the IRS or the Department of Justice, if the alleged infractions are severe enough. 

Filing an IRS Voluntary Disclosure timely could save you from severe sanctions. While there are no guarantees, by making a full disclosure and paying the taxes, fines, penalties and interest due, the IRS will be inclined to forego criminal prosecution.

Of course, you can only file an IRS Voluntary Disclosure for unreported income that was earned legally. You cannot qualify for the program if the income at issue was the result of illegal activity.

Alternatives to Filing a Voluntary Disclosure

A voluntary disclosure is not the only avenue to take when you have failed to report income.

You could always do nothing. However, since there is no time limit on how far back the IRS can take an investigation in cases of fraud, doing nothing could be a huge risk in many circumstances.

You could amend prior tax returns. In some circumstances, amending returns and paying taxes and interest owed without a formal disclosure will end the matter. The problem, however, is the taxpayer could still be prosecuted and/or audited and would have given up and of any protections that they could have received from filing a voluntary disclosure.

Guidelines for Filing an IRS Voluntary Disclosure

The IRS provides guidelines for filing voluntary disclosures, including what you have to promise in your submission and the timing of the submission.

Affirmative Statements

The following declarations should be included an IRS Voluntary Disclosure submission:

  • Your willingness to cooperate in determining your total tax liability
  • A statement and actual follow through of your willingness to pay what you owe in full, including tax, interest and penalties

Prior to Investigation

The IRS Voluntary Disclosure submission must be made before the IRS has started an investigation of your taxes and/or before you are notified that an investigation is forthcoming or being considered. If a third party has notified the agency that you have failed to report income that could also cause your disclosure to be rejected.

Deciding Whether or Not to File: A Maryland Tax Lawyer Can Help

Deciding if, when, and how to report undeclared income is a serious decision that should only be undertaken with the advice and counsel of an experienced Maryland tax lawyer.

If you find yourself in a situation where income was not properly reported to the IRS, you should contact an experienced Maryland tax lawyer like Kevin E. Thorn as soon as possible to discuss your options and assess the risk of each.

Contact Thorn Law Group either online or by calling us at 240-235-5096 today.

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