IRS Criminal Investigation Voluntary Disclosure Practice and Unfiled Tax Returns

Services for Real Estate Pros with Richardson Accounting and Tax

IRS Criminal Investigation Voluntary Disclosure Practice is a great option for those with potential criminal tax liability. Taxpayers must determine whether their conduct was willful or not willful. If it was willful, Voluntary Disclosure Practice may be an appropriate solution to avoiding criminal prosecution. On the other hand, if one's conduct was not willful, alternatives to the Voluntary Disclosure Practice are appropriate.


Nonfilers should consider Voluntary Disclosure Practice as a potential solution to willful non-compliance for failing to file tax returns. 


On the other hand, taxpayers that are not willful can instead file amended tax returns that have misstatements. Nonfilers can simply file their past due tax returns


Filing an application for Voluntary Disclosure Practice is not a guarantee that the IRS Criminal Investigation (IRS-CI) will agree to forego criminal prosecution. It is at their discretion whether to accept a taxpayer into the program and there are no Appeals rights. IRS-CI's decision is final.


It is important to note that Voluntary Disclosure Practice does not apply to taxpayers with illegal source income. This includes income that is legal at the state level but illegal at the federal level (IRS).


An example that comes to mind would be a Cannabis business. Cannabis is legal in some states but still illegal at the federal level with the IRS.


Taxpayers with potentially criminal exposure including nonfilers with past due tax returns should look into the Voluntary Disclosure Practice at the IRS.




Photo by cottonbro from Pexels

Posted by

Howard Richardson

Enrolled Agent

IRS and State Tax Representation

(213) 545-1799

Comments (2)

Mark Don McInnes, Sandpoint-Idaho
Sandpoint Realty LLC - Sandpoint, ID
North Idaho Real Estate - 208-255.6227

Cannibus business legal on state level and illegal on Federal level.  Has got to be a can of worms.  Interesting again.  Thank you, Mark

Jul 12, 2021 04:00 PM
Howard Richardson

You've got that right. Fed v. State taxation is an issue for Cannabis operators. Lots of them are profitable so the owners accept the risks as a cost of doing business.

Jul 12, 2021 04:09 PM
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Loved Mark Don McInnes, Sandpoint  comment and in life people take risks based on their risk tolerance... just remember Al Capone did not go to Jail for Murder... instead for tax evasion...Endre

Jul 12, 2021 10:49 PM
Howard Richardson

There is speculation that the current Presidential Administration will push to decriminalizing Cannabis at the federal level. This would be a game changer for the businesses. 

Jul 13, 2021 10:45 AM