IRS Proposes Significant Changes to Voluntary Disclosure Program (VDP) in 2026

The Internal Revenue Service (IRS) has proposed some significant changes to its Voluntary Disclosure Program (VDP). If adopted, these changes could take effect later this year and significantly impact the voluntary disclosure process. Learn more from Boston criminal tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

Proposed VDP Changes Would Impact Filing Procedures, Disclosure Requirements, Timelines, and Penalties

While the proposed changes would not alter the fundamental nature of the Voluntary Disclosure Program (VDP), they would alter many aspects of the process of proactively resolving willful tax law violations with the IRS. Key changes in the IRS’ proposal include:

• Applying to Participate in the VDP – Taxpayers would be required to apply for the VDP by electronically submitting IRS Form 14457, Voluntary Disclosure Practice Preclearance Request and Application. In their application, taxpayers would be required to voluntarily disclose “all years of noncompliance and provide a full and accurate description of the taxpayer’s willful noncompliance.”
• Additional Eligibility Requirements – Along with submitting IRS Form 14457, taxpayers seeking to participate in the VDP would also be required to: (i) waive the applicable statute(s) of limitations; (ii) agree to pay all applicable accuracy-related penalties; and (iii) sign an FBAR agreement, if applicable.
• Additional Filing Requirements – If conditionally approved to participate in the VDP, taxpayers would have three months to: (i) file all necessary amended or delinquent returns and FBARs; (ii) pay all applicable taxes, penalties, and interest “in full;” and, (iii) execute all “required agreements” to resolve their tax controversy with the IRS.
• Applicable Penalties – Taxpayers would be required to pay failure-to-file (but not failure-to-pay) penalties for delinquent returns, accuracy-related penalties for amended returns, and the applicable statutory penalties for delinquent and amended international information returns (i.e., IRS Form 8938) and FBARs.

The proposed three-month deadline for fully resolving willful tax law violations through the VDP is a significant change, as there is no such deadline under the current VDP terms. This would effectively eliminate the current option for taxpayers to enter into a full-pay installment agreement as part of the voluntary disclosure process. As is presently the case, if a taxpayer were to fail to comply with the proposed changes to the VDP (including the proposed three-month deadline), the taxpayer “may be subject to full examination and all applicable civil and criminal penalties.”

The IRS’ proposed changes are currently subject to public comment, with the public comment period closing on March 22, 2026. According to the IRS, “[i]f finalized, the revised procedures are expected to take effect six months after publication of the final terms.”

Request a Call with Boston Criminal Tax Lawyer Kevin E. Thorn

If you have questions about submitting a voluntary disclosure to resolve a willful tax law violation in 2026, we invite you to get in touch. To request a call with Boston criminal tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 617-692-2989 or contact us confidentially online today.