IRS Seeks Comments on Proposed Revisions to Voluntary Disclosure Procedure (12/23/25)

 On December 22, 2025, the IRS opened a 90-day public comment period, ending March 22, 2026, for proposed updates to its Voluntary Disclosure Practice. See IRS seeks public comment on Voluntary Disclosure Practice proposal (12/22/25), here. The indicated updates are short, so I will not summarize them here.

I mention the items that drew my particular interest with some comments as appropriate:

1. Pay all applicable taxes, penalties, and interest in full within 3 months of conditional approval. Previously, as I understood it, the VDP permitted the taxpayer to undergo IRS processes for installment payments or perhaps even compromise. The update requires full payment.

2. As before “The disclosure period will generally cover the most recent six years for delinquent and amended returns (the “Disclosure Period”).”

3. Taxpayers must start the process by submitting “Form 14457, Voluntary Disclosure Practice Preclearance Request and Application” where they "identify all years of noncompliance and provide a full and accurate description of the taxpayer’s willful noncompliance.” Note that, as stated, the disclosure of all years is not limited to the “Disclosure Period” as defined. The Form 14457 is now required, so this is not a change. I mention it because the Form itself seems to tie the disclosures to the Disclosure Period. See e.g., Instructions for “Line 3. Tentative years for which you are making the disclosure. See infra regarding determination of disclosure period.” Is the IRS really going to require all periods of willful noncompliance, even if prior the noncompliance in the Disclosure Period and even outside the normal criminal statute of limitations of six-years. Maybe.

4. A reminder: The IRS revised Form 14457 in July 2025 to eliminate the checkbox requiring admission of willful conduct about the noncompliance reported. The instructions still state that the Form should be filed only to report willful conduct. I think the omission of the checkbox was to address concerns that, if for any reason the filing of the form did not eliminate the possibility of criminal prosecution, the mere filing of the Form with the checkbox checked could be used as an admission of willfulness in a criminal case. But I am not sure elimination of the checkbox solves the issue, for the 2025 Form still seems to limit its applicability to willful conduct. I have included a footnote in the working draft of the 2026 Practitioner Edition of my Federal Tax Procedure book illustrating examples of this point from the July 2025 Form:

• Part II, 7. b. “Identify all individuals who aided in your willful noncompliance”
• Part II, 7. c. “The noncompliance narrative must include a thorough and detailed discussion of all Title 26 and Title 31 willful failures to report income, pay tax, and submit all required information returns and reports.”
• Instructions: “The IRS-CI VDP provides taxpayers whose conduct involved willful tax or tax-related noncompliance with a means to come into compliance with the tax law and avoid potential criminal prosecution.”
• Instructions, “You should consider applying for the IRS-CI VDP if you engaged in willful noncompliance that exposes you to criminal liability for tax and tax-related crimes.”

5. A related issue might be that the disclosures in the Form might be used in any subsequent period criminal prosecution (although I suspect that the mere filing of the Form would show the taxpayer was aware of the legal duties). Filers and their practitioners should be aware of this problem, although only an incredibly stupid person would continue the conduct after the Disclosure Period. Still, I wonder if a statement that, nothing in the responses should be considered an admission of willful conduct in any criminal prosecution; the risk of such as statement is that it might be treated as the filer not having filed a proper Form, thus eliminating a claim that the filer should not be criminally prosecuted.

This blog was cross-posted on the Federal Tax Crimes Blog here.