Compliance
Voluntary Disclosure Practice: Facing Past Non-Compliance? New Proposal Changes Coming
If you've missed tax filings or disclosures, the IRS’s proposed updates to the Voluntary Disclosure Practice offer a structured route—but with strict rules. Here's what to know.
By NomadicTax Research Team • 5-8 min read • March 9, 2026
## What is the Voluntary Disclosure Practice (VDP)?
The VDP is a program run by IRS Criminal Investigation that allows taxpayers who **willfully failed to comply** with tax law (e.g., not filing returns, hiding income) to come forward voluntarily. If accepted, they may avoid criminal penalties by catching up on filings and paying what they owe. ([irs.gov](https://www.irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice?utm_source=openai))
## What’s Changing in the Proposed VDP
The IRS issued a proposal at the end of 2025 to update how the VDP works. Key features include:
- A **three-month deadline** after conditional acceptance to file all missing or amended returns, pay all taxes, penalties and interest in full, and sign required agreements. ([irs.gov](https://www.irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice?utm_source=openai))
- The disclosure looks back over the most recent **six years** of tax returns or reports. ([irs.gov](https://www.irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice?utm_source=openai))
- Penalties: Amended returns face **accuracy-related penalties** (~20%), and delinquent or amended international information returns (like FBARs) can carry high per-return penalties. ([irs.gov](https://www.irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice?utm_source=openai))
## Examples to Clarify
- If John, a U.S. bank account owner, failed to file FBARs for the past eight years but wants to come forward using the VDP: under the proposal, only **six years** would be reviewed. He must bring everything up to date in three months and pay up.
- Sarah, who acted unintentionally but still didn’t file her self-employment returns for several years, might *not* qualify—because the VDP is intended for **willful** non-compliance. For non-willful cases, other options like amended returns or non-VDP streams may apply.
## Actionable Advice if You’re Considering VDP
- Consult a tax attorney or CPA **before** applying. Willfulness is judged, and precedent matters.
- Gather records—six years’ worth generally—and estimate where info is missing. Keep documentation of estimates.
- Be ready to pay everything due promptly—no installment deals under proposed rules within the three-month window.
## Why These Changes Matter
The proposed change sets **clear timelines and penalties**, curbing unpredictable delays. Taxpayers who may be eligible must decide whether to move forward quickly. If approved, these updates could become binding.
Together with the Dirty Dozen warnings and other compliance updates, the IRS is intensifying enforcement, especially on fraud, abuse, and those who’ve bypassed the system knowingly. Now’s the time to act.