There are 3 programs included in this IRM. Background for each program is listed below.

The IRS is organized to carry out the responsibilities of the Secretary of the Treasury under IRC 7801, Authority of Department of The Treasury. The Secretary has full authority to administer and enforce the internal revenue laws and has the power to create an agency to enforce these laws. The IRS was created based on this legislative grant.

IRC 7803, Commissioner of Internal Revenue; Other Officials, provides for the appointment of a Commissioner of Internal Revenue to administer and supervise the execution and application of the internal revenue laws.

Delegation Order 1-23 (Rev. 1), Authorization to Perform Functions of the Commissioner, division commissioners may delegate to officers under their supervision certain authorities on matters under their jurisdiction and cases under their responsibility.

The Director, WEIIC, is responsible for the policies and procedures in this IRM section.

The DFO, IIC, provides oversight for IIC examinations and to the CSDC unit regarding the information in this IRM.

Program managers over IIC examination groups are responsible for providing oversight and administration for the examination related procedures in this IRM. The program manager supervises frontline managers and operation staff.

The program manager over CSDC is responsible for providing oversight and administration for the CSDC related procedures in this IRM. The program manager supervises frontline managers and operation staff.

Group managers over examination groups are responsible for monitoring and overseeing work of their examiners. Group managers are responsible for the examination related procedures outlined in this IRM.

Group managers for the groups in CSDC are responsible for monitoring and overseeing work of their examiners and employees. Group managers are responsible for the CSDC related procedures outlined in this IRM.

Examiners are responsible for making determinations following requirements for OVDP and VDP for assigned cases in these programs as well as other requirements outlined in this IRM.

Examiners and employees of CSDC are responsible for timely completion of assigned work for the CSDC programs outlined in this IRM.

Program Reports: The Director, WEIIC prepares periodic briefing reports for the LB&I division commissioner focusing on:

Program Effectiveness: Operational and program reviews are conducted as needed.

The OVDP team maintains an "OVDP Active Cases Management Report" that includes the number of active cases in OVDP at any given time as well as the number of cases that have been shipped to the field for certification.

Streamlined procedures – no reports are currently prepared.

The LB&I:WEIIC:CSDC maintains the "Voluntary Disclosure Practice SharePoint List" that includes the number of disclosures received from CI and the number of cases that have been shipped to Planning and Special Programs (PSP) for field examination.

The follow term appears throughout this IRM section:

The following is a list of frequently used acronyms in this program:

The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. See the TBOR website for additional information.

Taxpayers have the right to receive assistance from the Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS, led by the National Taxpayer Advocate, that helps taxpayers and protects taxpayer rights. Refer taxpayers to TAS website when the contact meets TAS criteria (See IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria).

Related resources for each of the 3 programs included in this IRM are listed below.

Taxpayers are instructed to mail their completed streamlined procedures submission to Mail Stop 6063 AUSC. The following table provides the Taxpayer Services IRM procedures that can be used to assist in determining if correct actions have been taken on accounts submitted under streamlined procedures.

Members of CSDC handle processing of documents and correspondence relating to the streamlined procedures.

IRS CI is responsible for decisions allowing taxpayers to participate in VDP. This IRM does not supersede any portion of IRM 9.5.11.9, Voluntary Disclosure Practice. If there is any perceived conflict between this IRM and CI’s IRM concerning any CI procedure, CI’s IRM controls.

Taxpayers with illegal source income under federal law are not eligible to make a voluntary disclosure. Income from activities determined to be legal under state law but illegal under federal law is considered illegal source income for purposes of VDP. For example, cannabis (or marijuana) is illegal under federal law even though it has been legalized in several states.

VDP requires taxpayers to be truthful, timely, and complete in their disclosure. It also requires taxpayers to:

Cooperation includes, but is not limited to:

If a taxpayer fails to cooperate during their civil examination, including, but not limited to, meeting every element of cooperation listed above, the examiner may request CI revoke the preliminary acceptance. The examiner should follow the revocation procedures found in IRM 4.63.3.18.9, Revocation Procedures.

If preliminary acceptance into VDP is revoked, examiners may expand the scope of the examination to include all tax years and assert all potentially applicable civil penalties, including FBAR, to the maximum extent under the law.

If preliminary acceptance into VDP is revoked, the taxpayer may exercise their right to appeal.

A civil fraud penalty or fraudulent failure to file penalty, under IRC 6663 or IRC 6651(f), respectively, will apply to at least one year of every voluntary disclosure. The penalty should be asserted in the tax year with the highest tax deficiency. Tax deficiency is defined as the tax liability reported on a delinquent return secured as part of the voluntary disclosure submission or the increase in tax liability determined from examination adjustments.

In all cases where the fraud penalty applies, that penalty will be specifically identified and referenced by code section and title in all closing agreement, letters, reports and all other documents in accordance with normal examination procedures.

The application of a single year fraud penalty assumes that all terms of VDP have been complied with, including, but not limited to, full cooperation. If a taxpayer does not cooperate and revocation procedures are followed, based upon the facts and circumstances of the case, all applicable penalties may be applied and are not limited to the voluntary disclosure period.

Application of the single fraud penalty is in lieu of IRC 6662 accuracy-related penalties and IRC 6651(a)(1) and IRC 6651(a)(2) delinquency penalties.

The following examples relate to income tax penalties to be applied:

The estimated tax penalty under IRC 6654 is to be applied, when applicable, to all years of the voluntary disclosure as this is a computational proxy for interest.

For VDP cases involving FBAR non-compliance, FBAR violation(s) are treated as willful, and penalties apply accordingly. Compute these penalties in accordance with existing IRS penalty guidelines in IRM 4.26.16, Report of Foreign Bank and Financial Accounts (FBAR), and IRM 4.26.17, Report of Foreign Bank and Financial Accounts (FBAR) Procedures.

Penalties for the failure to file information returns will not be automatically imposed. Examiner discretion should be exercised based upon the facts and circumstances of each case and take into consideration the application of other penalties. See IRM 4.63.3.18.13.2, Other International Information Returns (IIRs).

Other applicable Title 26 penalties for Specialty Issues will be subject to penalties with a structure similar to income tax penalties and will be handled based upon the facts and circumstances of the case. See IRM 4.63.3.18.14, Other Specialty Issues (Estate and Gift, Employment Tax, Excise Tax, and Tax Exempt/Government Entities).

Managerial penalty approval is subject to the requirements of IRC 6751(b)(1). See IRM 20.1.1.2.3, Approval Prerequisite to Penalty Assessments, and IRM 20.1.1.2.3.1, Timing of Supervisory Approval.

For FBAR examinations, the field examiner’s position must be approved by an operating division FBAR coordinator, GM, and designated VDP FBAR counsel before discussing with the taxpayer or representative per IRM 4.26.17.4(2), Closing the FBAR Case, and by the manager prior to assessment per IRM 4.26.16.5.6, Managerial Involvement and Approval of FBAR Penalties.

For all non-OVDP voluntary disclosures received on or before September 28, 2018, the IRS has the discretion to apply the procedures outlined in this IRM.

The disclosure period measurement date is based on the received date of Part II of Form 14457, Voluntary Disclosure Practice Preclearance Request and Application. Taxpayers may need to adjust the estimated disclosure period identified on the Form 14457, Part I, submission based upon the actual disclosure period as determined by the Form 14457, Part II, received date.

Generally, VDP requires civil examinations of the most recent six tax years for which the due date has already passed. For returns filed on extension, but before the extension due date, the filing date will be treated as the due date.

There are three exceptions to the six-year disclosure period:

The following examples illustrate calculating the disclosure period:

Taxpayer representatives must complete a separate Form 2848, Power of Attorney and Declaration of Representative, for each taxpayer (individual, estate, and/or entity) participating in VDP, including specific information for the VDP. Examiners should review Form 2848 for completeness and proper authorization. See IRM 4.11.55.2.7.2, Processing of the POA, IRM 21.3.7.5, Form 2848, Power of Attorney and Declaration of Representative and Form 8821, Taxpayer Information Authorization Overview, and IRM 4.26.17.3.2, Power of Attorney in FBAR Examinations.

The VDP Hotline phone number is (267) 466-0020.

Taxpayers or representatives may call the VDP Hotline for procedural questions only. This Hotline will not provide legal advice or case-specific guidance. Advice provided by the VDP Hotline is not binding, as it is based on isolated issues. Field examiners are responsible for making a final determination based upon all facts and circumstances of the case.

This Hotline is a voice mailbox on which messages may be left. IRS personnel will return messages received on this Hotline and will document each call in the Voluntary Disclosure Hotline Call Log.

FBAR questions are not answered by the VDP Hotline. FBAR inquiries should be directed to the IRS FBAR Hotline, operated by CTR Operations in Detroit, or to FinCEN, depending on the question. For contact information and a description of the FBAR help offered by each hotline, see or refer callers to the Contact us section of the Report of Foreign Bank and Financial Accounts (FBAR) page on IRS.gov.

Taxpayers request preclearance by submitting Part I of Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, to IRS CI’s Global Operations.

Once precleared, taxpayers request preliminarily acceptance by submitting Part II of Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, to IRS CI’s Global Operations.

Once preliminary acceptance into the VDP is granted by CI, CI forwards taxpayers’ voluntary disclosures to CSDC.

Taxpayers must file FBARs electronically as required by FinCEN and provide confirmation of filing plus a copy of the electronically filed FBARs to the assigned field examiner. See IRM 4.26.16.3.1(2), General FBAR Filing.

CSDC establishes and begins preliminary case building, including associating required documents with the case file.

Once CSDC completes preliminary case building procedures, the case is sent to the appropriate PSP for classification, case building completion, and field assignment. See IRM 4.1.1.6.17, Voluntary Disclosure Program (VDP).

Once assigned, the examination begins and is conducted in accordance with IRM 4.10, Examination of Returns, with exceptions addressed in this IRM.

A complete package should be prepared by the taxpayer and available upon initial contact by the assigned field examiner.

PSP will establish one year, typically the most recent year, and field examiners are required to expand the scope to all years in the disclosure period and for all entities. Field examiners will follow related return pick-up procedures to establish prior and subsequent years, FBAR, IIR, related entities, and other specialty returns as applicable.

Taxpayers who file delinquent tax or information returns directly with the IRS processing campuses may have certain penalties automatically assessed and a collection notice may be issued to the taxpayer. During the examination, the field examiner should reconcile the taxpayer’s module and consider abatement of penalties automatically assessed as applicable.

Determine the Assessment Statute Expiration Date (ASED) for tax returns received and processed through the VDP. Information regarding statute of limitations is found under IRM 25.6, Statute of Limitations.

Taxpayers accepted into the VDP are required to submit the following documents needed for making a statute determination:

Protect statutes by following statute control procedures as outlined in IRM 25.6.23, Examination Process-Assessment Statute of Limitations Controls.

Agreeing to extend the assessment period is an element of cooperation.

If a Title 26 ASED is expired for a year in the disclosure period, and no exception to extend the statute applies, alpha code “OO” or “YY” (for offshore cases) will be used to establish the case. See IRM Exhibit 25.6.23-3, Instructions for Updating the Statute on AIMS.

If an ASED is about to expire and an extension cannot be secured, discuss with your manager and VDP analyst.

When a VDP case involves one or more years with barred ASEDs, a Form 906, Closing Agreement, is required for all years of the disclosure period. Consult with your VDP analyst for assistance.

Title 31 FBAR statutes and consents are fundamentally different than Title 26 statutes and consents. Field examiners must:

Instructions to Form 14457, Voluntary Disclosure Practice Preclearance Request and Application, direct taxpayers to submit signed original delinquent and/or amended returns to the assigned field examiner once contact is initiated. These returns should not be processed through normal return processing procedures to ensure proper penalty application within the established civil penalty framework for VDP.

When an original delinquent return for a year included in the disclosure period is provided to the field examiner, the field examiner will establish the return following IRM 4.4.9.6, Delinquent Return Received After SFR TC 150 Posted at MF. When an amended return is provided to the field examiner, do not process or make a partial assessment. In both cases, the field examiner will incorporate all adjustments on Form 4549/4549-A Report of Income Tax Examination Changes.

When delinquent and/or amended returns were prematurely submitted and were processed prior to case assignment, follow regular exam procedures.

Analysis of related returns should be considered. See IRM 4.10.5.4.1, Analysis of Related and Spin-Off Returns.

In the event a taxpayer fails to cooperate with the civil examination (cooperation is described in IRM 4.63.3.18.1(4), VDP Requirements), the field examiner may request CI revoke preliminary acceptance. Requests for revocation are expected to be rare because taxpayers agree to cooperate with the IRS upon signing their VDP submission. Revocation is at the discretion of the IRS. A taxpayer cannot request revocation, removal, or opt out of VDP.

Field examiners should attempt two requests with a taxpayer before considering revocation and continue to actively work both the Title 26 and the Title 31 examinations (if applicable) while pursuing revocation. The steps for revocation are outlined in the following paragraphs.

Discuss the lack of cooperation with taxpayers/representatives. If taxpayers remain uncooperative, the field examiner should discuss the facts and circumstances of the case with the GM and the VDP analyst. If it is agreed that the taxpayer is not cooperating, proceed with the next step.

Issue Letter 6229, Voluntary Disclosure Practice Revocation, informing taxpayers their preliminary acceptance into the VDP is conditional, in part, on cooperation.

Issue Letter 6230, Voluntary Disclosure Practice Revocation Status, the follow-up letter to Letter 6229, addressing taxpayers’ continued lack of cooperation. Taxpayers may request a review of the field examiner’s decision to request CI revocation of preliminary acceptance in writing to the TM.

If after issuance of Letters 6229 and 6230, it is determined that taxpayers are not cooperating, complete the “Voluntary Disclosure Practice – Revocation Referral Request” found on the VDP SharePoint.

Continue with the examination while waiting for a determination. Examiner may consider expanding the scope of the disclosure period as well as applying maximum penalties for all years.

The VDP analyst will notify the field examiner of CI’s determination.

If preliminary acceptance is revoked, the field examiner:

If preliminary acceptance is not revoked, proceed with the examination in accordance with the terms of the VDP. See Exhibit 4.63.3-1, Voluntary Disclosure Practice Flow Chart Revocation Process.

Before case assignment, but after preliminary acceptance from CI, taxpayers may submit payments for taxes, additions to tax, penalties, and interest, per the instructions to the Form 14557, Voluntary Disclosure Practice Preclearance Request and Application. Austin Campus Unit (ACU) will process those payments as designated by the taxpayers. If the taxpayers did not designate a specific tax or penalty type or the tax year, the payment will be applied to the most recent tax year identified by the taxpayers on their Form 14457.

After case assignment, taxpayers should provide payment to the assigned field examiner for processing.

All payments are advance payments; consequently, any credit or refund of the payments is subject to the limitations of IRC 6511. If a representative attempts to designate a remittance as a cash bond, please coordinate the issue with your VDP analyst.

Examiners are responsible for reconciling payments in all modules and must request funds be transferred to correct modules as necessary.

When a tax year module is on Integrated Data Retrieval System (IDRS) retention when the payment was received, the examiner should ensure the payment is posted correctly after submission.

VDP is a mandatory workstream. Thus collectibility is not a consideration for determining whether a VDP case is examined as these cases involve taxpayers who have voluntarily disclosed tax or tax-related crimes.

As part of cooperation, the terms of VDP requires full payment of tax, interest, and penalties.

In some cases, a taxpayer may not have the ability to full pay at the time of signature. As soon as a taxpayer indicates they do not have the ability to full pay, the field examiner should request a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B, Collection Information Statement for Businesses, with all required attachments from the taxpayer. Taxpayers will have up to 60 days to provide the requested information and, if not received timely, the request will be rejected.

A VDP collection referral is mandatory for all NonFullPay VDP cases. The VDP Collection Referral form is found on the VDP SharePoint. All VDP installment agreements must be approved by collection following the specific VDP referral form. Without collection concurrence, the Form 906, Closing Agreement, will not be executed by the designated VDP Technical Services.

The field examiner must complete all fields in Part I of the referral form and email to the Abusive Tax Avoidance Transaction (ATAT) contact based on the taxpayer’s address. ATAT Collection Coordinator Contacts by State are listed on the Collection Investigation Tools Knowledge Base.

In cases where the taxpayer agrees with amounts due, but does not pay in full and collection has approved the proposed installment agreement, the field examiner must ensure any closing agreement resolving a case with less than full payment includes the required language provided within the template NonFullPay Form 906 Closing Agreements, specifically addressing the waiver of collection due process rights under IRC 6320 et seq. and IRC 6330 for all tax periods addressed in the closing agreement. Templates can be found on the VDP SharePoint.

Any collection issues related to an inability to full pay Title 31 FBAR penalties must be elevated to your VDP analyst.

Offer-in-Compromise (OIC) will not be considered pre-assessment for a VDP case. If an OIC is prematurely submitted, the examiner will date stamp page 1 of Form 656, Offer in Compromise, in the upper right-hand corner and forward to the Centralized Offer-in-Compromise (COIC) location based on where the taxpayers reside, as shown on Offer-in-Compromise – Centralized Service Center Locations. If the taxpayer has no assessed liability, the offer will be returned as not processable by COIC. Notify the VDP analyst if an OIC is submitted.

This section does not apply to the review and approval of FBAR Agreements, which follow different approval and processing procedures. See IRM 4.63.3.18.13.1.1, FBAR Agreements - Drafting, Review, and Case Closing Process.

All VDP Form 906, Closing Agreement on Final Determination Covering Specific Matters, must be reviewed and approved by VDP counsel and designated VDP Technical Services before issuance to the taxpayer.

The field examiner drafts the Form 906 in accordance with IRM 8.13.1, Processing Closing Agreements in Appeals.

Once drafted, field examiners will commence the review process as directed on the "Voluntary Disclosure Practice Initial Form 906 Review Checksheet" which can be found on the VDP SharePoint.

After the taxpayer returns the signed Form 906, the field examiner will commence the review process as directed on the "Voluntary Disclosure Practice Final Form 906 Review Checksheet" , which can be found on the VDP SharePoint.

U.S. citizens, resident aliens, and certain nonresident aliens are required to report worldwide income from all sources, including foreign financial accounts, and pay taxes on income from those accounts at their individual tax rates. In addition to reporting income, there are various IIRs that must be filed annually.

If a voluntary disclosure involves both income tax noncompliance and a specialty tax issue, the examiner should use the Specialty Referral System (SRS) for assistance in working the specialty tax issues.

Cases involving only a specialty tax issue will be assigned directly to a field examiner with training related to that specialty issue: