The common scenario is somebody who has not filed for years but finds themselves wishing they had. Perhaps they have seen articles about the IRS’s claim to have identified millions of non-filers with significant income. Or maybe they realize that in this world of interconnected databases there is simply no place to hide.
Whatever their reasoning, the next question is “how do I get back into the tax system without invoking a criminal investigation?” There are three approaches to consider:
- Simply start filing and hope enough time goes by that the non-filing periods drop off the IRS radar.
- Then there is the “Quiet Disclosure” technique. Basically, you prepare returns for the last three years and mail them in separately every week or two, hopefully with a check. The idea here is that no one return processor will connect the dots that something significant is happening.
- Finally, there is Voluntary Disclosure. You file a letter with the IRS requesting preclearance for voluntary disclosure. The preclearance process is so that the IRS can check their records to determine if you are already under investigation and not eligible for the “Voluntary Disclosure” process. Once you are cleared to proceed, you confess all and begin negotiating the penalties without fear of criminal actions.
Which is the right approach? Depends upon the situation and money owed. Acceptance into the Voluntary Disclosure Program is the safest approach if you owe lots and a criminal investigation is likely. Run-of-the-mill cases are usually safe with the Quiet Disclosure approach.