Sales Tax > Glossary > Voluntary Disclosure Program

Voluntary Disclosure Program

What is the Voluntary Disclosure Program?

The Voluntary Disclosure Program (VDP) is a tax initiative in the United States that allows individuals and businesses to voluntarily report previously unfiled tax returns or unpaid taxes, thereby mitigating penalties and avoiding criminal prosecution while ensuring compliance with state and federal tax laws.

Benefits of Participating in a Voluntary Disclosure Program

Participating in a Voluntary Disclosure Program (VDP) offers numerous advantages for businesses and individuals seeking to rectify past tax compliance issues. By proactively disclosing unpaid sales taxes, taxpayers can often avoid hefty penalties and interest charges, as well as potential criminal prosecution. Additionally, VDPs foster a cooperative relationship with tax authorities, paving the way for smoother future interactions and compliance. This program not only mitigates financial risks but also enhances the taxpayer’s reputation by demonstrating a commitment to fulfilling tax obligations.

Eligibility Criteria for the Voluntary Disclosure Program

The eligibility criteria for participating in a Voluntary Disclosure Program vary by state but generally include specific conditions that must be met. Taxpayers must typically have unreported or underreported sales tax liabilities and should not currently be under audit or investigation by the taxing authority. Furthermore, many states require that all outstanding taxes be paid upon acceptance into the program. Understanding these criteria is crucial for ensuring successful participation and maximizing benefits.

The Process of Submitting a Voluntary Disclosure Request

The process of submitting a Voluntary Disclosure Request involves several key steps to ensure compliance with state regulations. Following this structured approach can facilitate smoother resolution of past tax issues:

• Research your state’s VDP requirements
• Gather necessary documentation related to your sales tax liabilities
• Complete the required disclosure forms accurately
• Submit your request along with any payment due
• Await confirmation from the taxing authority regarding acceptance into the program

Common Misconceptions About the Voluntary Disclosure Program

Misinformation surrounding the Voluntary Disclosure Program can lead to missed opportunities for taxpayers seeking relief from past non-compliance. One common misconception is that VDPs are only available for large corporations; however, they are accessible to individuals and small businesses as well. Another myth is that participating in a VDP will automatically trigger an audit; in reality, it often leads to more favorable treatment from tax authorities when approached proactively. Clearing up these misconceptions is essential for encouraging eligible taxpayers to take advantage of this beneficial program.

These guides are a reference point only and may need additional context for your specific application to be compliant. Contact a registered tax professional in your area for accurate information that applies to your specific situation.

⟵ Vendor's Compensation | Wayfair Decision ⟶