Specialized Returns for Individuals · International information reporting

International voluntary disclosure options

Verification 2026 Verified
tax year · reviewed 2026-08-21 · Draft for I. Ohu review

A client who discovers an old foreign account has two doors to choose between, and the choice is made by a fact about their own state of mind rather than by the numbers. The streamlined procedures require a certification, under penalties of perjury, that the failure was not willful. The Criminal Investigation Voluntary Disclosure Practice requires the opposite — a statement acknowledging willful failure to comply. There is no third door for a client who is unsure, and the certification is not a formality: it is a sworn statement in a matter where the government’s remedy for a false one is criminal.

The rule

The fork. willfulness decides the route — the streamlined procedures require a certification that the failure was non-willful, and the Criminal Investigation Voluntary Disclosure Practice requires the taxpayer to state that the conduct was willful and to sign an acknowledgement of it^TY2026 And the standard on which it turns: conduct due to negligence, inadvertence or mistake, or conduct resulting from a good faith misunderstanding of the requirements of the law^TY2026

Who may use the streamlined procedures. individual taxpayers and estates of individuals only; unavailable once the IRS has begun a civil examination of any taxable year, whether or not it concerns foreign assets, or where the taxpayer is under criminal investigation; a valid taxpayer identification number is required; and penalties previously assessed are not abated^TY2026

What must be submitted. the most recent 3 years for which the return due date, including any properly applied for extension, has passed, together with all required information returns — and the most recent 6 years for which the FBAR due date has passed^TY2026

The foreign route. For a taxpayer meeting the non-residency requirement, no failure-to-file, failure-to-pay, accuracy-related, information return or FBAR penalties for a taxpayer meeting the non-residency requirement who complies — and that protection survives a later audit unless the examination determines the original noncompliance was fraudulent or the FBAR violation willful^TY2026

The domestic route. the taxpayer must fail the non-residency requirement, must have previously filed a return for each of the most recent 3 years for which the due date has passed, must have failed to report gross income from a foreign financial asset, and the failures must have been non-willful^TY2026 And it costs: a Title 26 miscellaneous offshore penalty of 5 percent of the highest aggregate balance or value of the foreign financial assets subject to it — found by aggregating year-end balances and values for each year in the 3-year covered tax return period and the 6-year covered FBAR period and taking the highest of those years^TY2026

Neither closes anything. returns are processed like any other return — receipt is not acknowledged, there is no closing agreement, and the submission may still be selected for audit under the ordinary processes and checked against information received from banks and other sources^TY2026

The Voluntary Disclosure Practice. It is available only where the conduct was willful, and only if the disclosure is timely: a disclosure is timely only if received before the IRS has commenced a civil examination or criminal investigation, received information from a third party alerting it to the noncompliance, or acquired information about it from a criminal enforcement action such as a search warrant or grand jury subpoena^TY2026

What it buys, and what it does not. a voluntary disclosure will not automatically guarantee immunity from prosecution — Criminal Investigation takes a timely, accurate and complete disclosure into consideration in deciding whether to recommend prosecution, and it may result in prosecution not being recommended^TY2026

How it is made. a two-part application on Form 14457 — Part I preclearance, which determines eligibility but does not guarantee preliminary acceptance, then Part II within 45 days of the preclearance letter, with at most one 45-day extension; full payment or a full-pay installment agreement for tax, interest and penalties is required^TY2026 With one categorical exclusion: the practice does not apply to taxpayers with illegal sources of income, and income from activities legal under state law but illegal under federal law is treated as illegal source income for this purpose^TY2026

And a current caveat. a proposed revision of the practice was announced on 22 December 2025 for a 90-day comment period ending 22 March 2026 and has not been finalised — the IRS states the proposal creates no rights or expectations for taxpayers who applied before it is finalised and placed into effect, and eligibility under any revised practice will be determined by the procedures in effect when the changes are finalised^TY2026

Current figures

Item	Rule
The willfulness fork	willfulness decides the route — the streamlined procedures require a certification that the failure was non-willful, and the Criminal Investigation Voluntary Disclosure Practice requires the taxpayer to state that the conduct was willful and to sign an acknowledgement of it^TY2026
Non-willful conduct	conduct due to negligence, inadvertence or mistake, or conduct resulting from a good faith misunderstanding of the requirements of the law^TY2026
Streamlined eligibility	individual taxpayers and estates of individuals only; unavailable once the IRS has begun a civil examination of any taxable year, whether or not it concerns foreign assets, or where the taxpayer is under criminal investigation; a valid taxpayer identification number is required; and penalties previously assessed are not abated^TY2026
Submission periods	the most recent 3 years for which the return due date, including any properly applied for extension, has passed, together with all required information returns — and the most recent 6 years for which the FBAR due date has passed^TY2026
Streamlined foreign terms	no failure-to-file, failure-to-pay, accuracy-related, information return or FBAR penalties for a taxpayer meeting the non-residency requirement who complies — and that protection survives a later audit unless the examination determines the original noncompliance was fraudulent or the FBAR violation willful^TY2026
Streamlined domestic eligibility	the taxpayer must fail the non-residency requirement, must have previously filed a return for each of the most recent 3 years for which the due date has passed, must have failed to report gross income from a foreign financial asset, and the failures must have been non-willful^TY2026
Miscellaneous offshore penalty	a Title 26 miscellaneous offshore penalty of 5 percent of the highest aggregate balance or value of the foreign financial assets subject to it — found by aggregating year-end balances and values for each year in the 3-year covered tax return period and the 6-year covered FBAR period and taking the highest of those years^TY2026
No acknowledgement or closing agreement	returns are processed like any other return — receipt is not acknowledged, there is no closing agreement, and the submission may still be selected for audit under the ordinary processes and checked against information received from banks and other sources^TY2026
VDP timeliness	a disclosure is timely only if received before the IRS has commenced a civil examination or criminal investigation, received information from a third party alerting it to the noncompliance, or acquired information about it from a criminal enforcement action such as a search warrant or grand jury subpoena^TY2026
VDP effect	a voluntary disclosure will not automatically guarantee immunity from prosecution — Criminal Investigation takes a timely, accurate and complete disclosure into consideration in deciding whether to recommend prosecution, and it may result in prosecution not being recommended^TY2026
VDP mechanics	a two-part application on Form 14457 — Part I preclearance, which determines eligibility but does not guarantee preliminary acceptance, then Part II within 45 days of the preclearance letter, with at most one 45-day extension; full payment or a full-pay installment agreement for tax, interest and penalties is required^TY2026
Illegal source income	the practice does not apply to taxpayers with illegal sources of income, and income from activities legal under state law but illegal under federal law is treated as illegal source income for this purpose^TY2026
Status of the proposed revision	a proposed revision of the practice was announced on 22 December 2025 for a 90-day comment period ending 22 March 2026 and has not been finalised — the IRS states the proposal creates no rights or expectations for taxpayers who applied before it is finalised and placed into effect, and eligibility under any revised practice will be determined by the procedures in effect when the changes are finalised^TY2026
Willful FBAR penalty	the greater of $100,000 or 50 percent of the balance in the account at the time of the violation, and the reasonable cause exception does not apply (31 U.S.C. § 5321(a)(5)(C), (D))^TY2026
Limitation period	the assessment period for any tax to which the information relates does not expire before 3 years after the information is actually furnished — reaching failures under IRC §§ 1295(b), 1298(f), 6038, 6038A, 6038B, 6038D, 6046, 6046A and 6048, and confined to the items related to the failure only where it was due to reasonable cause and not willful neglect (IRC § 6501(c)(8))^TY2026

How it works in practice

Establish the facts before naming the route. The willfulness question is not a matter of preference, and a client who wants the cheaper answer is asking the adviser to certify something. Work out what the client knew, when, and from whom — the conversations with the foreign bank, the tick-boxes on prior Schedules B, the advice they were given and ignored.

Move quickly, because both doors close on the same events. The streamlined procedures are unavailable once a civil examination of any year has begun, and a voluntary disclosure is untimely once the Service has commenced an examination or investigation, received third-party information, or obtained information from a criminal enforcement action. Automatic information exchange means the third-party trigger is the one that fires most often and the client will not know it has.

Price the domestic route properly. The 5 percent miscellaneous offshore penalty is computed on the highest aggregate year-end value across the whole nine-year window — three covered return years and six covered FBAR years — not on the current balance. For an account that peaked years ago, the penalty can substantially exceed 5 percent of what is there now.

Understand what the streamlined submission is not. There is no acknowledgement, no closing agreement and no assurance. The returns go into the ordinary processing stream and can be audited like any others. Clients expect a letter confirming the matter is closed and no such letter exists.

And be honest about what the Practice offers (IRM 9.5.11.9). It does not guarantee immunity. It is a route to having a timely, truthful and complete disclosure taken into consideration when Criminal Investigation decides whether to recommend prosecution — which is worth a great deal, and is not the same thing.

Note the pending revision without relying on it. A proposed replacement is out for comment and has not been finalised. Advise on the practice as it stands, and flag to any client entering it now that the terms of a revised practice would be determined by the procedures in effect when the changes are finalised.

The tick-box that decided the route

A client inherited an account in Italy in 2016 and has never reported it. Her returns for every year since carry a Schedule B with the foreign account question answered “no”, and her prior preparer’s file note records that she was asked and said she had no foreign accounts.

She cannot certify non-willfulness on those facts without a serious conversation about what she understood the question to mean. A repeated negative answer to a direct question is the government’s standard evidence of willfulness. If she can genuinely explain it — she read the question as asking about accounts she had opened, or about accounts producing United States income — the streamlined route may be open. If she cannot, the streamlined certification is not available to her and the Practice is the honest route.

The penalty measured against a year that had passed

A client living in Ohio has an account in Taiwan that held $900,000 in 2021 and holds $180,000 now, after a property purchase. He qualifies for the streamlined domestic procedures.

His miscellaneous offshore penalty is 5 percent of the highest aggregate year-end value across the covered periods, which is the 2021 figure — $45,000 — not 5 percent of the current balance. The money that would have paid the penalty is in a house. Working out the covered-period high before advising on the route is the difference between a manageable number and an unaffordable one.

The letter that was never coming

A client made a streamlined submission eighteen months ago and has heard nothing. She asks her adviser to chase the Service for confirmation that the matter is closed.

There is nothing to chase. Streamlined returns are processed like any other return; receipt is not acknowledged and the process does not culminate in a closing agreement. Silence is the expected outcome and is not evidence of acceptance — the submission remains open to selection for audit on the ordinary criteria, and to verification against information the Service receives from banks and other sources.

The disclosure that arrived second

A client resolves in March to make a voluntary disclosure about an undeclared account in Zurich. He gathers documents for two months. In May, before he files, the Service receives information about the account from the foreign institution under an automatic exchange agreement.

His disclosure is no longer timely. A voluntary disclosure is timely only if received before the Service has received information from a third party alerting it to the noncompliance, and the exchange has done exactly that. He will not know it has happened. The delay was not unreasonable and it was fatal, which is why the preclearance request is filed first and the documents assembled afterwards.

Choosing the route by cost. It is chosen by willfulness, and the client must certify or acknowledge which it was.

Treating “non-willful” as “not fraudulent”. It means negligence, inadvertence, mistake or a good faith misunderstanding of the law — a narrower thing than merely not intending to cheat.

Assuming the streamlined procedures remain available. They close once a civil examination of any taxable year has begun, whether or not it relates to foreign assets.

Computing the offshore penalty on the current balance. It is 5 percent of the highest aggregate year-end value across the three-year covered return period and the six-year covered FBAR period.

Matching the two periods. Three years of returns, six years of FBARs. They are different.

Expecting a closing agreement. The streamlined process produces neither acknowledgement nor closure.

Promising immunity from the Practice. It does not automatically guarantee it; it makes a timely, accurate and complete disclosure a consideration in the prosecution decision.

Assembling documents before seeking preclearance. Timeliness is lost to events the client cannot see, so the clock matters more than the completeness of the file at the first step.

How this has changed

The architecture has been rebuilt more than once. The Offshore Voluntary Disclosure Program ran in several iterations from 2009 and closed on 28 September 2018. The streamlined procedures were first offered on 1 September 2012 for non-resident non-filers and were substantially expanded in 2014 — the eligibility was extended to taxpayers resident in the United States, a low tax threshold was eliminated, and the risk assessment process that had accompanied the 2012 version was removed. Those changes made the streamlined route the ordinary answer for the ordinary case, which it remains.

The Voluntary Disclosure Practice itself is longstanding and administered by Criminal Investigation rather than by any programme (IRM 9.5.11.9). It survived the closure of the offshore programme because it was never part of it.

The live development is that a proposed revision of the practice was announced on 22 December 2025 for a 90-day comment period ending 22 March 2026 and has not been finalised — the IRS states the proposal creates no rights or expectations for taxpayers who applied before it is finalised and placed into effect, and eligibility under any revised practice will be determined by the procedures in effect when the changes are finalised^TY2026 The proposal describes a six-year disclosure period, a three-month deadline for filing and full payment after conditional approval, and a standardised penalty framework — but it is a proposal, the comment period has closed, and it has not been placed into effect. Nothing in it is law today, and this page states the practice as it currently stands.

Exam focus

The certification is the examinable point. Streamlined requires certifying non-willful conduct; the Voluntary Disclosure Practice requires acknowledging willful conduct. Know the definition of non-willful conduct in the Service’s own words.

Know the two periods — three years of returns, six years of FBARs — and that they apply to both streamlined routes. Know that the foreign route carries no penalty for a qualifying taxpayer and the domestic route carries a 5 percent miscellaneous offshore penalty computed on the highest aggregate year-end value across the covered periods.

Know the timeliness bars for a voluntary disclosure, and know that neither route produces a closing agreement or guarantees anything.

Check yourself

1. What does a taxpayer certify to use the streamlined procedures?

Answer: That the failure to report all income, pay all tax and submit all required information returns, including FBARs, was due to non-willful conduct — conduct due to negligence, inadvertence or mistake, or resulting from a good faith misunderstanding of the requirements of the law.

2. How many years of returns and how many years of FBARs must a streamlined submission cover?

Answer: The most recent 3 years for which the return due date, including any properly applied for extension, has passed, and the most recent 6 years for which the FBAR due date has passed.

3. How is the Title 26 miscellaneous offshore penalty computed?

Answer: 5 percent of the highest aggregate balance or value of the foreign financial assets subject to it, found by aggregating year-end balances and values for each year in the covered tax return period and the covered FBAR period and taking the highest of those years.

4. When is a voluntary disclosure no longer timely?

Answer: Once the IRS has commenced a civil examination or criminal investigation, has received information from a third party alerting it to the noncompliance, or has acquired information directly related to the noncompliance from a criminal enforcement action such as a search warrant or grand jury subpoena.

5. Does a voluntary disclosure guarantee that the taxpayer will not be prosecuted?

Answer: No. It will not automatically guarantee immunity from prosecution. Criminal Investigation accepts timely, accurate and complete voluntary disclosures under consideration when determining whether to recommend prosecution, and a disclosure may result in prosecution not being recommended.

Change log

2026-08-21Initial draft. Sets out the two routes back into compliance — the streamlined filing compliance procedures in their foreign and domestic forms, and the Criminal Investigation Voluntary Disclosure Practice — with the willfulness certification that separates them, the three-year and six-year submission periods, the 5 percent Title 26 miscellaneous offshore penalty, the timeliness bars, and the fact that neither route acknowledges receipt or guarantees anything.