The IRS has announced that Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, has been revised. Form 14457 allows taxpayers who may face criminal prosecution for willful violation of tax law to voluntarily disclose information to the IRS. These updates and additions include:

  • IRS Criminal Investigation now accepts photocopies, facsimiles, and scans of taxpayer signatures;

  • an expanded section for reporting virtual currency;

  • a penalty structure for employment tax and estate and gift issues; and

  • a check-box for inability to pay in full.

Deputy Commissioner Services and Enforcement Doug O’Donnell encourages taxpayers to review the guidelines regarding the form and consult a trusted tax professional. Thousands of taxpayers have used the Voluntary Disclosure Practice since it began. It provides a compliance option for taxpayers who have potential criminal exposure. Taxpayers making such disclosure are still subject to civil examination and payment of all applicable taxes, interest, and penalties.

Taxpayers who did not commit any tax-related crimes and wish to correct mistakes should consider other options available to comply with their tax and reporting obligations. The IRS encourages taxpayers to consult with professional tax advisors to determine the best option.

A taxpayer’s voluntary disclosure must be timely, accurate, and complete. The taxpayer must cooperate with the IRS in determining the correct tax liability and make full payment of the tax, interest, and penalties. A taxpayer who is unable to make full payment may request that the IRS consider other payment arrangements. If a taxpayer anticipates they cannot pay the full amount, the taxpayer must disclose this and submit a proposed payment arrangement and a completed and executed Collection Information Statement. The burden is on the taxpayer to establish inability to pay, to the satisfaction of the IRS, based on full disclosure of all assets and income under the taxpayer’s control.