The IRS has been building a list of millions of nonfilers who have significant income. The names on this list have been prioritized and their people are starting to work on those cases. One of the options for someone who thinks their time is running out is the Voluntary Disclosure Practice.
The idea here is that by making disclosures before the IRS catches up with you, you demonstrate your goodwill by coming clean. This saves the government investigation time and money. There are two steps to the process. First, you need to make sure that an investigation is not already underway. This is called ‘Preclearance’ and takes 4 to 8 months before you receive an IRS letter welcoming you to the program or not. Once you have your preclearance letter in hand the next step is the actual disclosure followed by making arrangements to pay the taxes and penalties due.
The Pros of joining the program:
-
- Acceptance means jail time is most likely out.
- Penalties can be negotiated down.
There are some Cons to think about also:
-
- You must tell them everything and cooperate fully. Messing this up will result in you having provided evidence to the IRS to be used against you in a likely criminal case.
- Nonfilers with illegal income, even if legal under state law, are not eligible to participate.
