Voluntary Disclosures
The IRS has long had a voluntary disclosure policy which enables taxpayers who want to clean up problems that expose them to criminal prosecution to make a voluntary disclosure through the Criminal Investigation Division and to negotiate an agreement under which their problems can be settled without criminal prosecution. In recent years that policy has been formalized and much used to resolve the problems that have arisen with discovery of formerly secret accounts in Swiss and other bank secrecy countries. In 2009 the IRS announced the first Offshore Voluntary Disclosure Initiative (OVDI) under which qualified U.S. taxpayers could follow the procedure and avoid criminal prosecution and pay civil penalties that are well below what the U.S. tax authorities could, by law, otherwise seek to collect. This initiative had an expiration date, but it was succeeded by a second program in 2011 and a third program in 2012. Under these disclosures the IRS obtained information on foreign financial institutions, specific bankers, and financial advisors and other persons who aided and assisted U.S. taxpayers in maintaining undisclosed foreign accounts. This has given the CID a huge backload of work. OVDI is not available for cases involving illegal source income. Many states have similar programs.