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Issue Number:    IR-2025-124

Inside This Issue

IRS seeks public comment on Voluntary Disclosure Practice proposal 

IR-2025-124, Dec. 22, 2025

WASHINGTON — The Internal Revenue Service today opened a 90-day public comment period, ending March 22, 2026, for proposed updates to its Voluntary Disclosure Practice, including a more streamlined penalty framework.  

The proposed revisions reflect the IRS’s commitment to improve its processes, and to further incentivize non-compliant taxpayers to come into compliance.  

Key proposed changes 

Disclosure and compliance requirements. Under the proposed framework, taxpayers conditionally approved to participate must, within three months after being conditionally approved to participate: 

• File amended or delinquent income tax returns, international information returns, and Reports of Foreign Bank and Financial Accounts, as applicable; 
• Pay all applicable taxes, penalties, and interest in full; and 
• Execute required agreements to finalize participation. 

The disclosure period will generally cover the most recent six years for delinquent and amended returns (the “Disclosure Period”). Taxpayers who fully comply with these requirements will not be recommended for criminal prosecution.  

Penalty framework. The proposed penalty structure is intended to be clear, predictable, and consistent across all disclosures: 

• For delinquent returns, failure-to-file penalties apply for each year in the Disclosure Period; failure-to-pay penalties do not apply.
• For amended returns, a 20-percent accuracy-related penalty applies for each year in the Disclosure Period.
• For delinquent or amended FBARs, penalties apply per year and are subject to annual inflation adjustments.
• For delinquent or amended international information returns, penalties up to $10,000 per return, per year, apply.

Application and processing. Under the proposed updates, taxpayers will electronically submit Form 14457, Voluntary Disclosure Practice Preclearance Request and Application. The disclosure must identify all years of noncompliance and provide a full and accurate description of the taxpayer’s willful noncompliance. 

Once precleared, taxpayers will receive a conditional approval letter directing them to file the required returns and pay all amounts due within three months. 

Taxpayers must also: 

• Submit a signed closing agreement waiving statutes of limitations; 
• Agree to accuracy-related penalties; and 
• Sign an FBAR agreement, if applicable. 

The IRS may rescind the taxpayer’s conditional approval for failure to comply with VDP terms. Noncompliant taxpayers may be subject to full examination and all applicable civil and criminal penalties. While the IRS may review some disclosures, not all disclosures will be subject to a full examination. 

Payment terms. Taxpayers must make full payment within three months of their conditional approval.  

Comment period. The IRS invites public comments on the proposed updates during a 90-day comment period beginning today, Dec. 22, 2025. Comments may be submitted by email to [email protected], with the subject line “PROPOSED VDP PUBLIC COMMENT.” If finalized, the revised procedures are expected to take effect six months after publication of the final terms.  

Resources. More information about the IRS Voluntary Disclosure Practice, including a list of frequently asked question, is available at IRS.gov/vdp.  

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