2026 Update for Voluntary Disclosure

The Government is Turning up the Heat on Offshore Tax Evasion

Taxpayers are facing tremendous pressure as the Internal Revenue Service and the U.S. Department of Justice (DOJ) make offshore tax evasion a top enforcement priority.  The fines and penalties associated with undisclosed offshore bank accounts can be staggering.  At Thorn Law Group, our attorneys know what options and defenses are available to taxpayers with undisclosed overseas accounts. We strive to achieve the best results possible in every case we handle. 

Our tax attorneys have an in-depth understanding of IRS voluntary disclosure and tax amnesty programs and have helped hundreds of clients throughout the U.S. and abroad bring their undisclosed offshore accounts into full compliance with U.S. tax laws and regulatory requirements.

2026 IRS Voluntary Disclosure Practice

The current version of the IRS’s Voluntary Disclosure Practice (VDP) is open to taxpayers who have committed willful violations of tax law. While this includes violations of the Internal Revenue Code (IRC), it also includes violations of the Bank Secrecy Act (BSA) and Foreign Account Tax Compliance Act (FATCA)—and many taxpayers use the VDP to disclose BSA and FATCA violations related to the disclosure of offshore bank accounts and other foreign financial assets.

Eligibility and Participation Requirements

To qualify as “willful” under the VDP, a violation must represent, “[a] intentional, purposeful, deliberate act to hide income or assets and therefore evade filing requirements or payment of tax.” Willful violations carry criminal implications, and the VDP is specifically intended to serve as a mechanism for eligible taxpayers to avoid criminal prosecution. With that said, the IRS makes clear that submitting a voluntary disclosure does not guarantee immunity from prosecution; rather, participating in the VDP “may result in prosecution not being recommended.”

The IRS also provides guidance regarding what qualifies as a “voluntary” disclosure under the VDP. A disclosure will only be considered voluntary if it is submitted before all of the following:

• The IRS initiates a civil audit or criminal investigation;
• The IRS receives information about the violation from a third party; and
• The IRS receives information about the violation through another federal agency’s search warrant, subpoena, or other criminal enforcement action.

Along with submitting a voluntary disclosure, taxpayers seeking to avoid criminal prosecution for willful tax law violations under the VDP must also meet the following requirements:

• Timely submit all required documentation (including IRS Form 2848);
• Cooperate with the IRS to accurately determine their federal tax liability; and
• Pay all tax, penalties, and interest owed in full or enter into a full-pay installment agreement.

For taxpayers that are ineligible to participate in the VDP, their options depend on the reason for their ineligibility. If a taxpayer has committed a non-willful tax law violation, coming into compliance may involve submitting an amended or delinquent return or, in the case of an offshore disclosure violation, submitting a streamlined filing. If a taxpayer is ineligible because an audit or investigation is already underway, the taxpayer will need to defend against it to avoid unnecessary and unwarranted consequences.

Proposed Changes to the VDP in 2026

In January 2026, the IRS announced a set of proposed changes to the Voluntary Disclosure Practice. According to the IRS’s announcement, the proposed changes are intended to improve the IRS’s processes and “further incentivize non-compliant taxpayers to come into compliance.”

Among the changes is a new penalty structure for taxpayers participating in the VDP. If the proposed changes become final, the following penalties will generally apply to participating taxpayers:

• Delinquent Returns – Failure-to-file penalties apply for each year in the taxpayer’s disclosure period.
• Amended Returns – 20-percent accuracy-related penalty for each year in the taxpayer’s disclosure period.
• Delinquent or Amended FBARs – Penalties apply per year and are subject to annual inflation adjustments.
• Delinquent or Amended International Information Returns – Up to $10,000 per return, per year.

Our firm continues to monitor the IRS’ proposal and will inform our clients if the proposed changes become final. If you need more information about the current requirements to participate in the VDP, we invite you to contact us for a confidential consultation.

Previous Updates on the IRS Voluntary Disclosure Practice

2014 to 2016 IRS Voluntary Disclosure Program

The IRS created its first offshore voluntary disclosure program (OVDP) in 2009 in an effort to entice taxpayers with undisclosed overseas accounts to voluntarily come forward and disclose their accounts to the IRS.  Under the 2009 OVDP, certain taxpayers who voluntarily reported their previously undisclosed offshore accounts would have the chance to avoid criminal prosecution and become eligible for reduced fines and penalties in the form of a “miscellaneous offshore penalty.” 

In 2011, the IRS replaced the 2009 OVDP with the Offshore Voluntary Disclosure Initiative.  Based on the success and strong taxpayer participation in these two programs, the IRS launched a third offshore amnesty program in 2012 – The 2012 Offshore Voluntary Disclosure Program.

In June 2014, the IRS announced important revisions to the 2012 OVDP.  The 2014 changes are aimed at increasing the number of taxpayers voluntarily coming forward to disclose their unreported offshore bank accounts.  The IRS modifications include expanding eligibility criteria for the streamlined filing compliance process as well as changes to a number of other important program terms and conditions.    

In the past, only non-resident, non-filers were able to take advantage of the OVDP streamlined filing process, but under the 2014 OVDP, additional taxpayers who are residing abroad as well as some taxpayers who are living within the United States will be now be eligible to participate in the streamlined process.  

Key changes to the streamlined program include:

• Removing the $1,500 cap on unpaid tax liabilities per year;
• Eliminating the previously required risk questionnaire;
• Adding a new requirement mandating taxpayers to certify that their failure to disclose an offshore account was not willful in nature;
• Waiving all penalties for non-willful violations for eligible taxpayers residing outside of the United States; and,
• Limiting penalties for non-willful violators residing in the United States to five percent of the foreign assets that were not properly reported to the Internal Revenue Service.

The IRS also made important program changes which will impact taxpayers who acted willfully to hide their offshore accounts and assets from the federal government.  Under the 2014 OVDP, willful violators seeking to participate in the program will have to meet a number of new terms and conditions, including:

• Submitting more information when applying to the program, including providing the IRS with all of their account statements;
• Paying their offshore penalties when they submit their OVDP application to the IRS; and,
• Paying an increased offshore penalty (50% compared to 27.5%) should it become public that the IRS or the DOJ has launched an investigation of the bank where the taxpayer’s accounts are held before the taxpayer submits the pre-clearance request to the IRS. 

It is Important to Take Action Now

Taxpayers who are considering participating in the 2014 OVDP should discuss their situation with an experienced team of tax attorneys.  While you may be eager to bring your offshore accounts into legal compliance, you should consider several critical factors before applying to an IRS amnesty program.  Thorn Law Group can help you evaluate all of your options and determine whether the OVDP is right for you.  

If you have concerns regarding your offshore bank accounts or assets, we encourage you to contact Thorn Law Group today through our online contact form or call us at:

Washington D.C. Office:
(202) 349-4033

New Jersey Office: 
(201) 842-7696

Boston Office:
(617) 692-2989

We also invite you to learn more about IRS tax amnesty and offshore voluntary disclosure programs by reviewing the following pages on our site:

• 2016 Update IRS Amnesty Program
• About IRS Amnesty