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.