IRS Voluntary Disclosure Practice – Informational Post

IRS Seeks Public Comment on Proposed Updates to Voluntary Disclosure Practice

On December 22, 2025, the Internal Revenue Service (IRS) opened a 90-day public comment period, ending March 22, 2026, on proposed updates to its Voluntary Disclosure Practice (VDP).

The proposed revisions reflect an effort to improve and streamline the voluntary disclosure process, while continuing to encourage taxpayers with prior noncompliance to come forward and resolve matters through a structured civil framework.

Key Elements of the Proposal

• Disclosure period: The disclosure period will generally cover the most recent six years for delinquent or amended returns.

• Disclosure and compliance requirements: Taxpayers conditionally approved to participate must, within three months of approval:

o File amended or delinquent income tax returns, international information returns, and Reports of Foreign Bank and Financial Accounts (FBARs), as applicable;

o Pay all applicable taxes, penalties, and interest in full; and

o Execute required agreements to finalize participation.

• Penalty framework:

o For delinquent returns, failure-to-file penalties apply; failure-to-pay penalties do not.

o For amended returns, a 20% accuracy-related penalty applies for each year in the disclosure period.

o FBAR penalties apply on a per-year basis and are subject to inflation adjustments.

o Penalties for delinquent or amended international information returns may be assessed up to $10,000 per return, per year.

• Application and processing: Applications will be submitted electronically using Form 14457. Taxpayers must provide a full and accurate description of all years of noncompliance.

• Criminal protection: Taxpayers who fully comply with VDP requirements will not be recommended for criminal prosecution.

• Payment terms: Full payment is generally required within three months of conditional approval.

The IRS may rescind conditional approval for failure to comply with VDP requirements. Noncompliant taxpayers may be subject to examination and all applicable civil and criminal penalties. Not all disclosures will necessarily be subject to a full examination.

Public Comment Period

The IRS is inviting public comments on the proposed updates during the 90-day comment period ending March 22, 2026. If finalized, the revised procedures are expected to take effect approximately six months after publication of the final terms.

Additional information and frequently asked questions are available at IRS.gov/vdp.

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Posted by Zaher Fallahi, Tax Attorney, CPA.

Practice focuses on federal tax controversy and compliance matters involving undisclosed foreign accounts.

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Disclaimer: This post is provided for general informational purposes only and does not constitute legal or tax advice. Reading or sharing this information does not create an attorney-client or CPA-client relationship. Tax consequences and disclosure obligations depend on individual facts and circumstances