Specialized Returns for Individuals · International information reporting

International voluntary disclosure options

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^TY2026Verified 2026-08-21IRS, Streamlined filing compliance procedures, irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures; IRS, IRS Criminal Investigation Voluntary Disclosure Practice, irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice 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^TY2026Verified 2026-08-21IRS, Streamlined filing compliance procedures, irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures

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^TY2026Verified 2026-08-21IRS, Streamlined filing compliance procedures, irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures

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^TY2026Verified 2026-08-21IRS, U.S. taxpayers residing outside the United States, irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-outside-the-united-states; IRS, U.S. taxpayers residing in the United States, irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-in-the-united-states

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^TY2026Verified 2026-08-21IRS, U.S. taxpayers residing outside the United States, irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-outside-the-united-states

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^TY2026Verified 2026-08-21IRS, U.S. taxpayers residing in the United States, irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-in-the-united-states 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^TY2026Verified 2026-08-21IRS, U.S. taxpayers residing in the United States, irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-in-the-united-states

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^TY2026Verified 2026-08-21IRS, Streamlined filing compliance procedures, irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures

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^TY2026Verified 2026-08-21IRS, IRS Criminal Investigation Voluntary Disclosure Practice, irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice

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^TY2026Verified 2026-08-21IRS, IRS Criminal Investigation Voluntary Disclosure Practice, irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice

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^TY2026Verified 2026-08-21IRS, IRS Criminal Investigation Voluntary Disclosure Practice, irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice 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^TY2026Verified 2026-08-21IRS, IRS Criminal Investigation Voluntary Disclosure Practice, irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice

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^TY2026Verified 2026-08-21IRS, IRS Criminal Investigation Voluntary Disclosure Practice, irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice (read 21 August 2026)

Current figures

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.

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^TY2026Verified 2026-08-21IRS, IRS Criminal Investigation Voluntary Disclosure Practice, irs.gov/compliance/criminal-investigation/irs-criminal-investigation-voluntary-disclosure-practice (read 21 August 2026) 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.