IRS Voluntary Disclosure Program: An Important Discussion
Terry Garton initiated a conversation about the ongoing staffing difficulties at the IRS, particularly as the tax filing season approaches. He posited that now might be a critical time for the public to focus on the IRS Voluntary Disclosure Program (VDP). Valerie Makarewicz emphasized the significance of timely compliance with tax obligations, suggesting that the VDP might offer taxpayers a way to address any past-due returns while minimizing the risk of prosecution.
Garton sought clarification on what the VDP entails, prompting Tino Risela to explain that the program is designed for taxpayers who might have unintentionally fallen out of compliance but have not been subject to any investigations. He described it as a “pre-approval process,” which, if successful, leads to further engagement with the IRS. Updates to the VDP aim to streamline this process and provide more predictability for taxpayers.
Garton noted that the discussion is particularly relevant for individuals who knowingly failed to pay taxes and asked about the implications of delaying compliance. Makarewicz warned that it’s risky to live in fear of an IRS inquiry. She pointed out that ignoring tax obligations can lead to severe penalties and even jail time.
Risela added that the scope of the VDP includes not only missed payments but also the correction of any false information submitted to the IRS. He cited examples like the unreported income from Bitcoin, suggesting that this could be corrected through the program.
The conversation then shifted to specifics about legal and illegal income. Makarewicz explained that while all income must be reported, the VDP cannot protect income deemed illegal by federal law, even if it is legal at the state level. She clarified that the program isn’t an amnesty option but rather a means to mitigate penalties and potential criminal charges.
As they discussed IRS staffing challenges, Risela noted that while resource cuts can impact enforcement, the IRS continues to adapt, increasingly relying on technology and partnerships with other organizations. He reassured that even with fewer staff members, the IRS remains effective in its efforts.
Garton highlighted the importance of third-party information, suggesting that merely believing one won’t get caught is a dangerous mindset. Risela reiterated that various sources could trigger IRS investigations, so ignoring tax responsibilities is often shortsighted. He mentioned that once under scrutiny, participation in the VDP becomes impossible.
Makarewicz outlined the compliance requirements for individual taxpayers under the VDP, including a look-back period of six years. Taxpayers are advised to act decisively by filing necessary returns and settling any outstanding debts with the IRS within a set period after conditional approval.
Risela briefed on recent changes to the VDP, arguing that the updated structure places more responsibility on the taxpayer while establishing clearer timelines. He indicated that once a taxpayer is cleared, there are defined periods to file corrections and settle payments. The IRS aims to make the process more predictable and efficient.
As the discussion came to a close, Risela urged taxpayers to take prompt action towards compliance, emphasizing that it’s never too late to resolve previous issues. Makarewicz echoed this sentiment, calling on individuals to honor their obligations for the benefit of the broader community.
