Compliance
Stay Compliant: Reporting Requirements & Voluntary Disclosure Updates
Recent voluntary disclosure proposals and new IRS rules highlight evolving compliance landscape—including voluntary participation and backup withholding.
By NomadicTax Research Team • 5-8 min read • March 24, 2026
## Recent Compliance Shifts at the IRS
### Proposed Reforms to Voluntary Disclosure Practice (VDP)
The IRS unveiled proposed changes to the **Criminal Voluntary Disclosure Practice**, aiming to make it easier for noncompliant taxpayers to come forward. Key proposals include reducing penalties, removing burdensome willfulness requirements in application forms, and improving clarity around FBAR penalties. Public comments closed on **March 22, 2026**. ([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))
### Backup Withholding Thresholds for Settlement Organizations
Under OBBB, **third-party settlement organizations (TPSOs)** may face revised obligations triggering **94-entity backup withholding** under § 3406. Proposed regulations clarify thresholds for payments subject to withholding and when exceptions—like de minimis rules—apply. ([irs.gov](https://www.irs.gov/irb/2026-05_IRB?utm_source=openai))
## Key Implications for Business and Individuals
- Entities receiving payments from TPSOs should evaluate whether they’ll be caught by the revised backup withholding rules.
- Those planning to use the VDP should watch for final regulations—they may gain access to lower penalties and more realistic terms.
## Examples to Illustrate
- *Example 1*: A U.S. platform that processes gig-economy payments to contractors may now need to withhold taxes under the new TPSO rules if those payments cross revised thresholds. Ensure your vendor partners or payment processors disclose relevant withholding requirements.
- *Example 2*: An individual who previously avoided VDP due to strict willfulness criteria might now qualify under more lenient proposed criteria, reducing financial exposure.
## Compliance Checklist
1. Inventory all payment flows to identify TPSO counterparties and backup withholding exposure.
2. Update internal policies and reporting systems to capture required information proactively.
3. For any ongoing or past noncompliance (especially foreign accounts, FBARs), explore VDP eligibility and consult a tax professional.
4. Track the Treasury’s final regulations to apply them when effective and adjust procedures accordingly.
5. Consider formalizing documentation for payments, contracts, and disclosures to solidify your position under revised rules.
**Bottom line:** Compliance burdens are growing but there’s opportunity too—especially for those who move early. With careful planning, you can limit exposure and protect your business or personal finances.