Question 9

Tax Fraud – Frequently Asked Questions (page 9)

What are the requirements for voluntary disclosure?

There are several specific requirements for a voluntary disclosure. They include that the taxpayer have only legal source income, that the disclosure be timely and that the taxpayer make arrangements to pay any outstanding tax liability, including penalties and interest. Therefore, it is crucial to consider that the I.R.M. specifically provides that a disclosure is untimely if the IRS has initiated a “civil examination” of the taxpayer or has notified the taxpayer of its intention to do so.

The voluntary disclosure policy is an exercise of prosecutorial discretion; it is not a bar to prosecution, but merely a factor to be considered. Therefore, prosecution and conviction may still result even if there has been a voluntary disclosure.