On February 15, 2022, the IRS announced that IRS Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, and the accompanying instructions to the form had been revised. Because the revisions provide clarification on certain issues that caused confusion during the submission process, the revisions are welcome news to many tax professionals, including this writer. The revisions are discussed more fully below.
Introduction to the Voluntary Disclosure Practice
A full primer on the IRS’s Voluntary Disclosure Program (“VDP”) can be found here. In short, the VDP permits non-compliant taxpayers an opportunity to come forward, file missing or amended returns correcting prior year reporting, and pay the government taxes that are owed. In exchange, the taxpayer making the disclosure receives what is akin to amnesty, provided the taxpayer meets all of the eligibility requirements of the VDP. This can result in significant reduction of criminal risks and exposure for the non-compliance in addition to significant reductions in civil penalties associated with the non-compliance (in some cases).
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