Compliance
Compliance Alert: What Taxpayers Need to Know about IRS Proposed VDP Changes and AI Policy
New IRS proposals on its Voluntary Disclosure Practice (VDP) and a formal governance policy for AI are rolling out; these require proactive compliance planning to avoid surprises and ensure alignment with evolving rules.
By NomadicTax Research Team • 5-8 min read • March 15, 2026
## What’s New from the IRS — VDP and AI Governance
Recent announcements from the IRS in early 2026 include two major compliance issues: changes to the **Voluntary Disclosure Practice (VDP)** and a comprehensive **AI governance policy** affecting how the IRS—and those contracting with it—must handle artificial intelligence tools. ([taxpayeradvocate.irs.gov](https://www.taxpayeradvocate.irs.gov/news/nta-blog/the-irs-seeks-public-comment-on-proposed-voluntary-disclosure-practice-changes/2026/02/?utm_source=openai))
- **VDP Changes Proposed**: The IRS is seeking comment (until **March 22, 2026**) on proposed revisions to its criminal VDP. The revisions aim to “improve its processes” and “further incentivize non-compliant taxpayers” to come into compliance. Commenters suggest more is needed for broader participation. ([taxpayeradvocate.irs.gov](https://www.taxpayeradvocate.irs.gov/news/nta-blog/the-irs-seeks-public-comment-on-proposed-voluntary-disclosure-practice-changes/2026/02/?utm_source=openai))
- **AI Governance Manual**: As of **February 10, 2026**, the IRS published manual IRM 10.24.1 for AI governance. It mandates that all IRS units and contractors using information systems must follow guidelines consistent with law, civil rights, transparency, and protection of privacy. ([irs.gov](https://www.irs.gov/node/156046?utm_source=openai))
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## Areas Likely to Trigger Compliance Risk
- **Disclosure delays**: Those evaluating whether to use VDP to remedy past non-compliance need to track timelines and how proposed changes might make VDP more or less attractive. Once finalized, rules may tighten or expand eligibility.
- **Use of AI tools**: Any contractor, vendor, or in-house user who handles IRS data or submits information to the IRS may be bound by the new AI governance manual. This has implications for legal, procurement, data privacy and security practices.
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## How to Prepare Now — Best Practices
1. **Review if VDP is right for you or your clients**: see what changes are expected; collect required docs; consider comments to the IRS if you have suggestions. Note that VDP applies to criminal voluntary disclosure specifically.
2. **Audit your AI/data-handling systems** if you're engaged with the IRS or receiving federal funds: ensure your privacy practices, training, vendor contracts, and oversight meet the policy. Non-IRS contractors may be subject indirectly.
3. **Update internal policies**: add clauses about AI ethics, accountability, and auditability; make sure data retention, consent, bias checks are incorporated.
4. **Train staff & advisors** so no one misuses AI in ways that violate IRS rules or civil rights laws. Keep logs of decisions made by AI systems.
5. **Track IRS developments**: future proposed regulations (like for clean fuel credits under OBBB), final versions of the AI rules, and any published outcome of the VDP comment period. ([irs.gov](https://www.irs.gov/newsroom/news-releases-for-february-2026?utm_source=openai))
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## Example Implications for Businesses & Tax Pros
- A small firm that helped clients with overseas income reporting might have older unreported liability; VDP might now offer favorable terms—starting now to assess eligibility could save sanctions.
- Vendors using AI-based tools to prepare documents or manage taxpayer data may need to run privacy and bias audits, and ensure contractors understand the IRS IRM.
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**Bottom line**: these compliance shifts may appear procedural, but they can create real liability for those not keeping pace. Stay ahead by auditing your practices now, engaging when public comment is open, and documenting everything.