It is currently the practice of the IRS that a voluntary disclosure will be considered along with all other factors in the investigation in determining whether criminal prosecution will be recommended. This voluntary disclosure practice creates no substantive or procedural rights for taxpayers, but rather is a matter of internal IRS practice, provided solely for guidance to IRS personnel.
A voluntary disclosure will not automatically guarantee immunity from prosecution. However, a voluntary disclosure may result in prosecution not being recommended. This practice does not apply to taxpayers with illegal source income.
A disclosure is timely if it is received before:
- the IRS has initiated a civil examination or criminal investigation of the taxpayer, or has notified the taxpayer that it intends to commence such an examination or investigation;
- the IRS has received information from a third party (e.g., informant, other governmental agency, or the media) alerting the IRS to the specific taxpayer’s noncompliance;
- the IRS has initiated a civil examination or criminal investigation which is directly related to the specific liability of the taxpayer; or
- the IRS has acquired information directly related to the specific liability of the taxpayer from a criminal enforcement action (e.g., search warrant, grand jury subpoena).
See Internal Revenue Manual 18.104.22.168 (12-02-2009) (Voluntary Disclosure Practice). Individuals or business seeking to make a voluntary disclosure should contact competent tax counsel, who can explain the options and come up with a defensible strategy.