By Michael Raff & Quin Stack | Law Offices of Michael Raff
Originally published in the Illinois State Bar Association’s Federal Taxation newsletter, April 2026, Vol. 71, No. 7
- The IRS is restructuring the Voluntary Disclosure Program, with new rules expected as early as June 22, 2026.
- The current program offers more time to file, greater payment flexibility, and a different penalty structure than the proposed changes.
- The Law Offices of Michael Raff, a tax attorney firm in Lincolnshire, IL, helps clients evaluate whether the VDP is the right path and guides them through every step.
If you have unfiled tax returns or unreported income that you have been putting off addressing, time is no longer on your side. The IRS has announced proposed changes to its Voluntary Disclosure Program (VDP), and depending on your situation, the current version of the program is more favorable than what is coming.
As tax attorneys who regularly guide clients through the VDP process, we want to break down exactly what may be changing, what it means for taxpayers with long-term filing problems, and why the coming months will be the most important window to act.
What Is the IRS Voluntary Disclosure Program?
The IRS Voluntary Disclosure Program gives taxpayers who have willfully failed to meet their federal tax obligations a structured way to come forward on their own terms before the IRS opens an investigation. This includes situations involving:
- Unfiled federal tax returns across multiple years
- Underreported income that was never disclosed
- Undisclosed foreign financial accounts or overseas assets
Participation in the program does not guarantee immunity, but it has historically offered a more favorable penalty structure and dramatically reduced the risk of criminal prosecution compared to being discovered through an IRS investigation.
This is a very different situation from the general compliance and audit prevention work we do for clients who are current on their filings. The VDP is specifically for taxpayers who already have a problem and need a controlled, legal way to resolve it.
Why the IRS Voluntary Disclosure Program May Be Changing in 2026
Following a December 2025 announcement, the IRS accepted public comments on proposed VDP changes through March 22, 2026.
That may leave a narrowing window to use the current version of the program, which carries benefits that the proposed version removes entirely.
As IRS tax lawyers who regularly guide clients through voluntary disclosure, we want to walk through what the proposed changes are in plain terms so you can make an informed decision about your next step.
How the 2026 VDP Proposed Changes Affect Your Tax Situation
1. Shorter Timeline to File and Pay
The current VDP gives taxpayers a longer window to prepare and file all amended or delinquent returns. Multiple extension options are available. Taxpayers who cannot pay the full balance upfront can enter into installment agreements to pay over time.
The proposed version eliminates all of that. Under the new rules:
- All returns must be filed within three months of acceptance into the program
- Full payment is required within that same three-month window
- No extensions are permitted under any circumstances
- No installment agreements are allowed
For a taxpayer with five or ten years of unfiled returns, three months is a tight window. Gathering records, reconstructing financials, and preparing returns for multiple years takes real time.
2. New Penalty Structure
The current program allows the IRS to assert the 75% civil fraud penalty, but only on the single year with the highest outstanding tax balance. The proposed changes would eliminate this penalty.
At first glance, that sounds like good news. But the trade-off matters:
- Failure to file penalties would now be imposed on each delinquent return individually, rather than being waived or reduced.
- A 20% accuracy-related penalty would be assessed for every year included in the disclosure period.
For taxpayers whose liabilities are relatively consistent year over year, this restructuring could result in higher total penalties than the current framework, even without the 75% fraud penalty. For those with one particularly large year and many smaller ones, the change could be beneficial, removing the risk of the outsized fraud penalty on that single year.
3. No Revenue Agent Involvement
The new iteration of the program moves away from requiring revenue agent involvement in the post-acceptance process. While this streamlines the experience for some, it removes a layer of flexibility that currently exists when working through the disclosure.
Who Benefits and Who Faces Greater Risk
The proposed changes are not entirely detrimental, but they are clearly not designed with long-term non-filers in mind.
Taxpayers who benefit from the proposed program:
- Those with a single year of disproportionately large tax liability who want to avoid the 75% fraud penalty on that year.
- Those who are fully prepared to file all returns and pay in full within three months.
Taxpayers who face greater exposure under the proposed changes:
- Long-term non-filers who need time to gather records and prepare multiple years of returns.
- Taxpayers who cannot pay in full and would need an installment agreement.
- Those whose liabilities are roughly equal year over year, who would face a heavier aggregate penalty under the new structure.
The current program offers tools that the proposed version would eliminate: flexibility, installment agreements, and extended timelines. These features exist precisely for people in complicated situations who need time and space to get into compliance.
Is It Better to Act Now or Wait?
For most taxpayers with unfiled returns or unreported income, waiting is a risk.
Voluntary disclosure works best when you initiate contact, not when the IRS does. Once an investigation begins, eligibility for voluntary disclosure is limited or unavailable. The approaching changes to the VDP are a compelling reason to begin the process now, before the terms become less favorable.
If you have been on the fence, the next month will be the best opportunity you have.
How Can Law Offices of Michael Raff Help?
We regularly assist individuals and businesses in evaluating eligibility for the IRS Voluntary Disclosure Program and navigating the disclosure process from beginning to end. We help clients identify all years of noncompliance, work with professionals under a privileged arrangement to prepare for and submit required filings, and negotiate the most favorable resolution available under the current rules.
If you have questions about whether the VDP is right for your situation, we offer a free consultation to start that conversation.
