IRS Voluntary Disclosure Program: The Willful FBAR Fix

What the Voluntary Disclosure Practice Is and Who It Is For

There is a moment when an offshore problem stops being a paperwork problem. You knew the accounts existed, you knew there was something to file, and you filed nothing, or you signed returns that answered "no" to the foreign-account question year after year. From that moment forward, the question is no longer how to catch up on forms. It is how to end this without a criminal case.

The program built for that moment is the IRS Criminal Investigation Voluntary Disclosure Practice, which is the IRS's current name for what most people still search as the voluntary disclosure program or OVDP. The old Offshore Voluntary Disclosure Program closed in September 2018; the current practice, run on Form 14457, replaced it. The structure is a trade. You come to the government before it comes to you, you disclose everything, you pay a substantial but defined civil penalty, and in exchange the matter ends in a binding agreement with prosecution ordinarily not recommended.

This page is for the willful side of the line, meaning you knew about the reporting duty and chose not to comply, or recklessly disregarded it, or deliberately avoided learning about it. If your miss was innocent (you never knew the form existed, you inherited an account and never touched it, your accountant never asked), you do not belong here and the price of this program would be a waste. The streamlined procedures resolve non-willful cases for 5% or nothing, and a person who reported all the foreign income and only missed the form has a simpler late-filing path. Our FBAR penalties guide maps the whole landscape, and the willful vs non-willful guide walks the line itself, because that one call decides everything on this page. One more gate applies here. The program is for legal-source income only; money from an illegal source is not eligible.

What Voluntary Disclosure Buys You

Start with what it does not buy, in the IRS's own words. The IRS describes the practice this way. “A voluntary disclosure will not automatically guarantee immunity from prosecution; however, a voluntary disclosure may result in prosecution not being recommended.” That sentence is deliberately careful, and we will not improve on it. It is not immunity. What it has meant in practice, for a disclosure that is truthful, complete, and on time, is that the case stays civil. No other compliance program offers criminal protection of any kind.

The second thing it buys is finality. A completed voluntary disclosure ends in a Form 906 closing agreement, a contract that binds the IRS and closes the disclosed years on the disclosed issues. It is the only program in the system that ends in a binding agreement. A streamlined submission, by contrast, is simply a filing; the IRS can audit it for years afterward, and there is no document at the end that says it is over.

To see what those two things are worth, look at what willful penalties cost when they are never fixed. A Florida man who inherited a Swiss fortune was found willful for three years of unfiled FBARs, and after eight years of litigation the final judgment stood at $12,255,813. The collection fight has since produced repatriation orders, a contempt finding, and, in 2026, an arrest warrant. He had once been inside the 2010-era voluntary program, disclosed his holdings, and opted out. The full story is in our case study, the $12 million Swiss inheritance. The people who complete a disclosure pay a hard number once and go back to their lives. The people who fight pay lawyers for a decade and can still lose everything the program would have saved.

The Two-Step Process and Timeline

The current practice runs in two steps, both on Form 14457.

Step one is preclearance. Part I of the form identifies you and describes, in general terms, the nature and years of the conduct. It goes to IRS Criminal Investigation by fax, at 844-253-5613. CI checks whether you are eligible, mainly whether it already has your information from somewhere else. If the check comes back clean, CI issues a preclearance letter. Read that letter for what it is. Preclearance determines eligibility; it is not acceptance into the practice, and it is not a safe harbor. It means CI found no disqualifier at the moment it looked.

Step two is the full disclosure. Part II is due within 45 days of preclearance (a single extension can be requested before the deadline runs, never after). This is the heavy lift, and it covers six years, with complete original or amended returns, all FBARs filed through the government's e-filing system, every companion information return the accounts touch, and a narrative statement. The narrative is where the case is won or lost. The form requires it to “describe your specific acts of noncompliance and how they were willful.” It is a factual account signed under penalty of perjury, so it cannot exaggerate the conduct and it cannot minimize it; a narrative that mischaracterizes the facts is itself a false statement and can unwind the whole disclosure. This is why the narrative is drafted by the attorney, not the client.

After Part II is accepted, CI hands the case to a civil examiner, who reviews the disclosure, may ask for more, and computes the penalty. You then receive the proposed numbers, pay in full within roughly three months, and sign the Form 906 closing agreement. Cooperation is a condition the entire way; a taxpayer who stops cooperating can have the acceptance revoked, the disclosure period expanded, and maximum penalties asserted.

One procedural mercy is recent. The July 2025 revision of Form 14457 removed the check-the-box willfulness admission that had briefly forced applicants to declare themselves willful before the government said a word. The same revision added detailed digital-asset disclosure (wallet addresses and transaction detail) and guidance for an executor filing on behalf of someone who has died, which matters for the estate cases below.

What Voluntary Disclosure Costs

The penalty structure is defined, which is the point. You trade an open-ended catastrophe for a hard number.

• One civil fraud penalty, 75%. The fraud penalty applies to the single year with the highest tax deficiency, at 75% of that underpayment. For that year it takes the place of the accuracy and late-filing penalties.
• 20% on the other years. The remaining years in the six-year period carry the ordinary 20% accuracy-related penalty on their underpayments.
• The willful FBAR penalty. Every FBAR miss inside a disclosure is treated as willful; you do not argue non-willfulness inside this program. The penalty is computed under the IRS's ordinary examiner guidelines, which in most cases produce a total, across all the years, of no more than 50% of the highest aggregate balance of the unreported accounts, allocated across the years by balance, with an absolute ceiling of 100%. So on accounts that peaked at $1 million combined, the FBAR side of a cooperative disclosure typically comes to about $500,000.
• No failure-to-pay penalty. The failure-to-pay penalty does not apply under the practice. Interest on the old tax does, as it always does.
• Full payment, fast. Payment in full is expected within about three months of the proposed-penalty letter. There is no installment agreement inside the program and no offer in compromise before assessment, which is why ability to pay is screened before entry, not after.
• The cost of not paying. An assessed penalty that goes unpaid grows on its own. Once a federal debt runs more than 90 days past due, the law adds a late-payment charge of up to 6% a year on top of interest, accruing back to the date of delinquency, and in January 2026 a federal appeals court enforced the full 6% against a couple who had agreed to their FBAR assessments and then never paid, adding about $84,000 to each spouse's $420,051 judgment.

Those numbers are real money, and the honest comparison is not against zero. It is against the unprogrammed willful stack, where federal law sets the penalty at the greater of $165,353 or half the account balance, per account, per year, over a six-year window, plus the fraud penalty, plus the criminal exposure the program is designed to end. On the same $1 million in accounts, an examiner outside the program can reach the full 100% ceiling, and a prosecutor is not bound by any ceiling at all. Willful failure to file an FBAR is a felony. The program's price is the cheaper path through willful facts, which is exactly why it exists.

The Eligibility Clock: Voluntary Means Before They Know

Everything above depends on one word, voluntary, and the IRS defines it by timing. A disclosure is timely only if it arrives before the IRS has opened a civil examination or criminal investigation of you, before it has received information about your noncompliance from any third party (an informant, another government agency, a John Doe summons served on your bank), and before it has picked up your information through a criminal enforcement action such as a search warrant or a grand jury subpoena. Any one of those events, and the program is gone. There is no grace period and no second chance.

The clock matters because the data is moving whether or not you are. Under the FATCA network, financial institutions across 113 treaty jurisdictions report their US account holders to the IRS every year. Israeli banks report. Swiss account data begins flowing in 2028. Foreign banks under their own settlement agreements have handed over thousands of account-holder names. Every year that passes is another cycle of reporting that can land your name in the IRS's files, and the day it does, the choice this page describes stops being yours.

This is also why the pre-filing screen matters as much as the filing. A preclearance request submitted after the IRS already holds your data does not just get rejected. It hands the government a signed statement that you have an offshore problem, with none of the program's protection attached. Before anything is faxed, we check the third-party risk, including the client's banking history and any prior IRS contact, so that the preclearance is a door opening and not a confession.

VDP vs. Streamlined: The False Certification Crime

The temptation is obvious. The streamlined procedures cost 5% or nothing, and voluntary disclosure costs what the last section describes. So every willful taxpayer, at some point, hears an advisor float the cheaper lane. Here is the catch. A streamlined submission requires you to certify, under penalty of perjury, that your conduct was non-willful. If that certification is false, it is not an aggressive tax position. It is a federal crime of its own.

The decisions discussed here are published opinions in other parties' cases, not matters this firm handled, and they predict nothing about yours. But one of them is the clearest warning in this field, and it comes from Florida. An American accountant and financial executive who served as CFO of a large Russian gas company held tens of millions of dollars in Swiss accounts at Coutts, structured under corporate names. When the bank demanded tax compliance, its own file recorded his “reason for departure” as “U.S. client not tax compliant”, and he moved the accounts to another Swiss bank with his then-wife listed as the owner. In 2015, facing Swiss bank disclosures, he entered the streamlined program and certified that his “delay in filing U.S. tax returns [was] not due to any willfulness, but rather the result of [his] reasonable attempts to comply with increasingly difficult administrative requirements.” The accounts he then reported held over $93 million. A jury convicted him, and the conviction for the false streamlined certification itself, as a false statement to the government, was affirmed by the federal appeals court covering Florida in August 2025, along with a count for a willfully non-compliant FBAR. The same opinion reversed two failure-to-file counts as filed too late and sent the case back for resentencing, so the final sentence is still to come. The affirmed counts are the lesson. The certification was the crime.

The trap runs the other way too. An advisor who is unsure about willfulness and routes a genuinely innocent client into voluntary disclosure costs that client enormous, unnecessary penalties on a case that qualified for 5% or zero. Having accounts at a bank the government once prosecuted does not make you willful; the facts do. That is why the willfulness screen comes first, on your actual facts, before any program is chosen, and why the uncertain middle usually resolves toward the program whose certification cannot send you to prison. The willful vs non-willful guide shows how courts draw the line, and the streamlined guide covers the lane for the people who genuinely belong in it.

The Proposed Reform and Why Waiting Is the Wrong Bet

In December 2025 the IRS proposed a major overhaul of the practice. Under the proposal, the 75% fraud penalty would be replaced by a 20% accuracy-related penalty for each year, the FBAR penalty would apply per year at an inflation-adjusted rate rather than as the 50%-of-balance structure, information-return penalties would be capped at $10,000 per return per year, and the two-step process would merge into a single electronic submission. For many taxpayers that would be a dramatically better deal.

It is not the deal on the table. The comment period closed in March 2026, no final terms have been published as of August 18, 2026, and even after publication the revised procedures would take effect only six months later. The current framework, the one priced above, is the law of today, and this page will be updated when that changes.

So should you wait? Walk through the bet you would actually be placing. Waiting wagers that the rule becomes final, unchanged, before any foreign bank, informant, or data match puts your name in front of the IRS. If you win, you pay less. If you lose, eligibility is gone forever, and you face the full willful stack with no protection and no discount, because the reform only helps people who can still get in. A possible future discount is not worth a permanent loss of the exit. There is also a wrinkle inside the proposal itself. The merged one-step process would require the complete self-incriminating narrative up front, before the IRS confirms acceptance, which removes the protective buffer the current preclearance step provides. Anyone counting on the new rules to make this easier should read that part twice. Our advice, for almost everyone, is that the eligibility clock outweighs the pricing debate, and the time to move is while the door is provably open.

The Estate Angle: Penalties Survive Death

This is where offshore work meets our Florida practice, and it is the part families learn too late. FBAR penalties do not die with the person who owed them. They survive as claims against the estate, and a Florida federal court has allowed the government to pursue a willful penalty after the account holder's death, with the exposure following the estate's assets to the family. An estate that distributes with an unresolved FBAR history is not finishing the problem. It is handing the problem to the beneficiaries, with the money attached.

For a personal representative, the duty is concrete. On any estate with foreign accounts, check the decedent's FBAR history before assets go out the door, treat unassessed penalties as a contingent liability, and resolve the exposure first. The government has six years from each missed due date to assess, so recent years are live years; our FBAR statute of limitations guide maps the clocks. If the decedent had already entered a voluntary disclosure, the personal representative can continue it, and the current form contemplates exactly that, with executor filing guidance built in.

For a living client, the same facts run in reverse, and this is one of the more unusual pieces of estate planning we do. A client with known willful exposure who is elderly or seriously ill can enter the practice now, pay the defined penalty, and die with a Form 906 closing agreement instead of a contingent seven-figure claim. The agreement binds the IRS, lifts the cloud from the estate, and lets the plan distribute cleanly. It is not a pleasant conversation. It is a far better one than the version their children would otherwise have with the government.

How We Handle Voluntary Disclosure

The Voluntary Disclosure Practice is handled in this office from beginning to end, meaning the willfulness screen, the third-party-risk check before anything is filed, the preclearance, the Part II narrative, the companion-form mapping, the civil examination, and the closing agreement. All of it sits under attorney-client privilege, which is the reason this conversation belongs with a lawyer first. What you tell an accountant is not protected if a matter turns criminal. What you tell us is, from the first phone call.

A disclosure also contains a large amount of return preparation, six years of returns and FBARs, and we do not pretend that is lawyer work. It is done by a tax preparer working under the attorney's direction, inside an arrangement that extends the privilege to their work, so the numbers get professional hands without the protection leaking. Streamlined submissions are different. Once the screen says a client is genuinely non-willful, that lane is return preparation with a certification attached, and we refer it to an international tax preparer, staying available for the legal questions the certification raises. We tell you at the consult which lane your facts support and what it should cost, before you commit to anything. Most of this work is done remotely, by phone and video, for clients across Florida, out of state, and abroad, including the many Americans in Israel. And where the problem surfaces inside an estate, the disclosure and the administration are run together, so the estate closes clean.

Frequently Asked Questions

Common Situations

These are illustrative composites, not real clients or real cases.

The business owner with the old numbered account. A Florida business owner has kept a Swiss account under a corporate name since the 2000s, answered "no" on the foreign-account question every year, and knows it. His bank has begun asking for a US tax form. The screen confirms the facts are willful and, so far, unknown to the IRS. He enters the practice, the six-year package goes in with a narrative that tells the truth plainly, and the matter ends with a closing agreement and a number he can plan around, instead of an indictment he cannot.

The client a preparer almost certified. A retiree's tax preparer offers to run her through the streamlined program for a small fee, without ever asking why her returns denied the account she managed by mail-hold from Miami. The willfulness screen says her facts cannot support a non-willfulness certification. She enters voluntary disclosure instead, pays more than streamlined would have cost, and never signs the document that could have turned a penalty case into a criminal one.

The father who cleaned it up in time. A widower with a serious diagnosis tells his estate attorney about an account abroad that his returns never mentioned. Instead of writing a plan around a hidden liability, he enters the practice, his personal representative is briefed to continue it if he dies mid-process, and the closing agreement arrives before he does anything irrevocable. His children inherit an estate, not an investigation.

Sources of Law

• FBAR duty and penalties: 31 U.S.C. §5314 (reporting duty); §5321(a)(5) (civil penalties; willful tier at §5321(a)(5)(C) to (D), greater of $165,353 (inflation-adjusted, 31 C.F.R. §1010.821) or 50% of the balance); §5321(b) (6-year assessment, 2-year collection). Criminal: 31 U.S.C. §5322 (willful violation a felony; up to 5 years, 10 aggravated).
• Voluntary Disclosure Practice framework: IRM 4.63.3 (Manual Transmittal Apr. 21, 2025) (six-year disclosure period; civil fraud penalty under IRC §6663 or §6651(f) on the highest-deficiency year, in lieu of accuracy and delinquency penalties; willful FBAR penalties computed per IRM 4.26.16 and 4.26.17; Form 906 closing procedures; revocation and appeal on revocation). Willful computation guidance: IRM 4.26.16.5.5.3 (transmittal Aug. 26, 2025) (total in most cases no more than 50% of the highest aggregate balance, allocated across years; 100% ceiling); IRM 4.26.17 (transmittal Sept. 4, 2025).
• Process and practice statement: IRS, IRS Criminal Investigation Voluntary Disclosure Practice, irs.gov (Part I faxed to 844-253-5613; Part II within 45 days; timeliness conditions; the prosecution wording quoted above). (retrieved 2026-08-18)
• Form 14457 (Rev. 7-2025) and instructions (no willfulness checkbox; Part II narrative requirement quoted above; digital-asset disclosure; executor guidance; payment terms, no pre-assessment offer in compromise). The 2018 interim guidance memo (LB&I-09-1118-014) is no longer on irs.gov; the current framework lives in the IRM and the form.
• Proposed VDP revisions: IRS newsroom release of Dec. 22, 2025 (20% accuracy-related penalty per year; per-year FBAR penalty; $10,000-per-return information-return cap; merged submission; effective six months after final publication). Comment period closed Mar. 22, 2026; no final terms published as of Aug. 18, 2026. (retrieved 2026-08-18)
• Late-payment charge on unpaid penalties: 31 U.S.C. §3717(e) and 31 C.F.R. §901.9(d) (charge of up to 6% a year after 90 days' delinquency, accruing from the date of delinquency); United States v. Reyes, 164 F.4th 78 (2d Cir. Jan. 7, 2026) (affirming the full 6% charge on unpaid willful FBAR judgments).
• False streamlined certification: United States v. Gyetvay, Nos. 23-13254, 23-13383 (11th Cir. Aug. 7, 2025) (slip; published) (affirming the 18 U.S.C. §1001 conviction for the false streamlined non-willfulness certification and the 2014 FBAR count under 31 U.S.C. §§5314 and 5322(a); reversing two §7203 counts as time-barred; vacating the sentence and restitution and remanding).
• Estate exposure: United States v. Estate of Schoenfeld, 344 F. Supp. 3d 1354 (M.D. Fla. 2018) (a willful FBAR penalty survives the account holder's death and may be pursued against the estate and its distributed assets). Unfixed willful penalties: United States v. Schwarzbaum, 127 F.4th 259 (11th Cir. 2025) (judgment reduced to $12,255,813; collection litigation ongoing). Decisions in other parties' cases; verified against the opinions as retrieved 2026-08-18; no citator service run.
• Streamlined comparison figures: IRS, Streamlined Filing Compliance Procedures (5% domestic penalty; 0% foreign; non-willfulness certified on Forms 14653/14654 under penalty of perjury). (retrieved 2026-08-18)

Updated on August 18, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate and tax planning, business structuring, and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. This article is general information about US law, not legal or tax advice, and does not create an attorney-client relationship. The court decisions discussed are published opinions in other parties' cases, not matters handled by this firm, and they predict nothing about your case. The voluntary disclosure track is handled in this office; streamlined submissions and stand-alone return preparation are referred to an international tax preparer. Penalty figures are inflation-adjusted and program terms can change without notice; the proposed revisions described above were not final on the date shown. Your result depends on your specific facts.