Coming Soon: New IRS Voluntary Disclosure Program

At the Summer Tax Summit in St. Louis, the IRS shared a materially important update for taxpayers and practitioners considering participating in a voluntary disclosure.  Specifically, Jarod Koopman, Chief of the IRS Criminal Investigation Division, announced that the IRS is putting the finishing touches on a redesigned voluntary disclosure program, and the changes should be public within the next 60 days. 

The agency has heard the complaints about the current process being slow and cumbersome. Koopman said the new program will set a 120-day target for resolving cases — but that means taxpayers need to show up with all their returns ready to file.

Another notable shift: the IRS is moving away from full examinations in favor of an upfront screening process, likely powered by artificial intelligence, to move cases through more efficiently.

Perhaps the biggest win for taxpayers is on penalties. The FBAR penalty for unreported foreign accounts is dropping from 50% to somewhere in the 20-30% range. This is a welcome change, consistent with comments Matthew L. Roberts and I submitted earlier this year (link) through the State Bar of Texas Tax Section.   Digital assets are also being folded directly into the general program rather than handled separately, with a lower penalty rate for nonfraudulent crypto reporting failures.

For clients sitting on unfiled returns, unreported income, or certain other compliance problems, this could be the right moment to act. Lower penalties and a faster process could make voluntary disclosure a much more attractive option than it’s been in years.

We will be watching closely for the official rollout and will share updates as details emerge.

In the meantime, if you have questions about whether voluntary disclosure makes sense for your situation, please feel free to reach out to me at jglassman@meadowscollier.com or 214-749-2417.