Is a New 2026 FBAR Voluntary Disclosure on the Horizon?
Is a New 2026 IRS FBAR Voluntary Disclosure on the Horizon?
The IRS Voluntary Disclosure Program/Practice (VDP) has been a staple of the Internal Revenue Service for many years. Previously, the voluntary disclosure program was referred to as the Offshore Voluntary Disclosure Program or OVDP. The offshore version of the program was a specific offshoot OVDP program and was directed primarily for taxpayers who had undisclosed foreign accounts, assets, investments, and income. In 2018, OVDP was terminated and instead merged back into the traditional voluntary disclosure program. The current version of VDP is not very taxpayer-friendly.
The purpose of VDP is to entice taxpayers who are willfully behind to come forward and voluntarily get into compliance to avoid criminal prosecution. While the IRS does not guarantee that it will not investigate and prosecute taxpayers for criminal violations stemming from voluntary disclosure, the service has been consistent in not doing so. Recently, the IRS proposed updates to the voluntary disclosure practice.
Let’s take a look at the proposed changes. It is only proposed at present, because “The Internal Revenue Service today opened a 90-day public comment period, ending March 22, 2026, for proposed updates to its Voluntary Disclosure Practice, including a more streamlined penalty framework.”
Disclosure and Compliance Requirements
One of the key components of the proposed voluntary disclosure practice is that taxpayers have a short amount of time to file the necessary documents to get into compliance and pay all fines, penalties, taxes, and interest.
Previously, taxpayers had to wait until an agent was assigned before they could submit their documentation. With the delays and setbacks with the Internal Revenue Service, it could take months, if not years, before an agent is assigned to the taxpayer’s disclosure; the IRS intends to change this procedure to speed up the process.
As provided by the IRS:
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“Disclosure and compliance requirements. Under the proposed framework, taxpayers conditionally approved to participate must, within three months after being conditionally approved to participate:
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File amended or delinquent income tax returns, international information returns, and Reports of Foreign Bank and Financial Accounts, as applicable;
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Pay all applicable taxes, penalties, and interest in full; and
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Execute required agreements to finalize participation.
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The disclosure period will generally cover the most recent six years for delinquent and amended returns (the “Disclosure Period”). Taxpayers who fully comply with these requirements will not be recommended for criminal prosecution.”
Penalty Framework
The IRS also proposes to update the penalty component, which may or may not benefit taxpayers depending on various factors, such as what types of unreported international reporting forms they have and whether they have filed the original tax returns that were close to being accurate in terms of income reporting.
It would appear that the IRS will eliminate the 75% fraud penalty for the year that has the highest unreported income, but include a 20% annual accuracy penalty — and since the IRS requires 6 years of original or amended returns as part of this submission process, whether this updated penalty structure will benefit taxpayers or not would depend on the individual taxpayer.
As provided by the IRS:
“Penalty framework. The proposed penalty structure is intended to be clear, predictable, and consistent across all disclosures:
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For delinquent returns, failure-to-file penalties apply for each year in the Disclosure Period; failure-to-pay penalties do not apply.
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For amended returns, a 20-percent accuracy-related penalty applies for each year in the Disclosure Period.
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For delinquent or amended FBARs, penalties apply per year and are subject to annual inflation adjustments.
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For delinquent or amended international information returns, penalties up to $10,000 per return, per year, apply.”
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Application and Processing
One new component of the proposed voluntary disclosure practice is that the IRS will accept Form 14457 electronically. Previously, taxpayers submitted the 14457 preclearance form by fax, which would often cause a delay.
In addition, in a previous statement by the IRS, the IRS does intend to update and modify the Form 14457.
As provided by the IRS:
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“Application and processing. Under the proposed updates, taxpayers will electronically submit Form 14457, Voluntary Disclosure Practice Preclearance Request and Application. The disclosure must identify all years of noncompliance and provide a full and accurate description of the taxpayer’s willful noncompliance.
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Once precleared, taxpayers will receive a conditional approval letter directing them to file the required returns and pay all amounts due within three months.
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Taxpayers must also:
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Submit a signed closing agreement waiving statutes of limitations;
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Agree to accuracy-related penalties; and
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Sign an FBAR agreement, if applicable.
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The IRS may rescind the taxpayer’s conditional approval for failure to comply with VDP terms. Noncompliant taxpayers may be subject to full examination and all applicable civil and criminal penalties. While the IRS may review some disclosures, not all disclosures will be subject to a full examination.”
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Payment Terms
Finally, as to payment terms, the IRS reiterates that the taxpayer only has three months from their conditional approval to submit payment. This may cause a few issues with eligibility because some Taxpayers may not be able to submit payment in just 3 months. Other issues may be if the IRS provides conditional approval — what happens if ultimately the taxpayer is rejected, but had already submitted payment.
As provided by the IRS:
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“Payment terms. Taxpayers must make full payment within three months of their conditional approval.
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Current Year vs. Prior Year Non-Compliance
Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.