Carolyn Schenck Weighs in on Update to Voluntary Disclosure Program in Bloomberg Law

Proposed changes to an IRS program meant to lure wealthy tax evaders to come clean with a promise of lower penalties intend to make it more popular, but taxpayers could still hesitate to self-report.

The IRS is accepting comments on updates to its criminal voluntary disclosure practice, which the Taxpayer Advocate Service has called ineffective and unappealing.

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Still, having a clearer and more consistent penalty framework will encourage taxpayers to join the program and frees up the IRS and Justice Department to work on other cases, said Carolyn Schenck, a Caplin & Drysdale Member and former IRS fraud counsel.

“We operate under a voluntary compliance system, and that only works if people have a way to come in from the cold,” Schenck said. “The IRS can’t audit its way out of these problems, and programs like this recognize that enforcement alone isn’t the answer.”

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