If you have criminal tax exposure the IRS does not know about yet, the Voluntary Disclosure Practice is the managed way in — and timing is everything. A disclosure made before the IRS has your name generally takes prosecution off the table. The same facts surfaced after an investigation opens are just evidence. This page covers the current practice, who it is for, and the fork in the road most people get wrong.
By Sam Brotman, JD, LLM, MBA · Last updated August 2026
What is the IRS Voluntary Disclosure Practice?
The VDP is IRS Criminal Investigation’s program for taxpayers with willful noncompliance who come forward before they are caught. It replaced the old Offshore Voluntary Disclosure Program, which closed in 2018, and it covers both domestic and offshore conduct — unreported income, false returns, unfiled years, offshore accounts. It is not amnesty: you pay the tax, interest, and substantial penalties. What you are buying is the practice’s core trade — a timely, truthful, complete disclosure with full cooperation is almost never referred for prosecution.
How the process works
Two stages, both run through IRS-CI on Form 14457: preclearance, then the full disclosure. Part I asks CI to confirm you are eligible — that the government does not already have you. Only after preclearance do you submit Part II with the narrative of what happened. Then the case moves to a civil examiner to compute the tax, and the standard resolution runs six years of corrected returns with a civil fraud penalty applied to the highest-liability year. Expensive, defined, and closed — which is the point.
Willful or non-willful: the fork that decides everything
The VDP is built for willful conduct. If your noncompliance was non-willful, you likely belong in a different — and far cheaper — lane. Streamlined Filing Compliance Procedures handle non-willful offshore failures at a 5% penalty (or none for qualifying non-residents); delinquent-filing procedures handle information returns with reasonable cause. Certifying non-willfulness when the facts say otherwise is itself dangerous, and this call — willful or not — is a legal judgment about your facts, made once, in privilege, before anything is filed. It is the single most consequential decision in the process.
When is it too late?
Timeliness ends when the IRS gets there first. A disclosure is not timely once the IRS has opened an examination or investigation of you, has received information from a third party about your noncompliance, or has acquired your records through enforcement — a summons to your bank, a John Doe summons to your exchange, a referral. The practical meaning: every month of waiting is a bet that no 1099, no whistleblower, no bank program, and no data leak names you first.
What about California?
The FTB, CDTFA, and EDD do not automatically honor a federal disclosure — the state exposure needs its own plan. California runs its own criminal programs (see our guides to FTB criminal investigations, CDTFA criminal investigations, and EDD criminal investigations), and a federal VDP filing is discoverable reality the state will eventually see. Sequencing the federal and state sides — what gets disclosed where, and in what order — is a core part of doing this correctly.
What to do before you call anyone
Do not amend returns quietly, do not file “catch-up” returns without a strategy, and do not discuss the facts with your accountant first. Quiet disclosures — just filing amended returns and hoping — leave the criminal exposure open while flagging the change. And your accountant can be subpoenaed; your lawyer cannot. The right first step is a privileged conversation that decides willfulness, eligibility, and sequencing — then the paperwork.
Tell us what is going on
Short version is fine. This conversation is privileged, we read every one of these, and you will hear back from a person.
If you would rather talk it through, book a free 15-minute call or call us at (619) 378-3138. Related: criminal tax defense · how IRS criminal investigations work.