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New York Voluntary Disclosure & Compliance Program 

When someone begins to resolve their debts, the most valuable tool they can have is knowledge. Without tit, debtors can easily miss out on opportunities to reduce or eliminate debt. By extension, taxpayers often fail to fully maximize their overall financial situation. That’s because they just don’t have the knowledge necessary to fully understand their options.  As we’ve discussed time and again, the federal government has multiple programs to resolve outstanding tax debt.  These programs give honest taxpayers the ability to clean their tax slate and move forward.   As it turns out, the several states also have programs in place to help delinquent taxpayers come into tax compliance.

New York’s Voluntary Disclosure & Compliance Program, or VDCP

We spend a great deal of their time ensuring that our knowledge of debt resolution mechanisms stays updated. Our professionals make certain that their understanding of the New York State offer-in-compromise program (for New York State back tax debt) reflects the most up-to-date formulation of that program, and that this understanding incorporates as much of our collective experience with OICs as possible. The same thing is true for the New York State (and New York City) Voluntary Disclosure & Compliance Program (VDCP). Depending on the specifics of a taxpayer’s situation, taking advantage of  the New York VDCP can be a very wise decision. In this post, we’ll discuss the basics of the New York VDCP and then highlight some of the common reasons why it’s so useful to taxpayers. 

New York Voluntary Disclosure Benefits 

 The New York State Voluntary Disclosure & Compliance Program provides a measure of relief for taxpayers who owe back taxes but haven’t yet filed all required tax returns. Essentially, the New York VDCP allows New York State taxpayers to “come clean.” It allows them to pay outstanding tax debt without incurring additional penalties, while still avoiding potential criminal prosecution for non-filing. Accordingly, using the VDCP for tax resolution is quite different from most of the other resolution options we’ve discussed, such as installment payment agreements and offers in compromise.

Under the right circumstances, the VDCP may make the most sense for a taxpayer. For taxpayers in the program, the New York State Department of Taxation and Finance both waives penalties and agrees to not pursue criminal charges. This latter provision is very important, because it means that even tax evasion and fraudulent behavior can be forgiven. In order to qualify for these significant benefits, though, a taxpayer must do two things.  The taxpayer must execute a compliance agreement and agree to pay their past due balance in full.  Taxpayers need to realize, though, that entry into the VDCP doesn’t immunize them from criminal prosecution for misdeeds in other jurisdictions.  Given this potential for outside criminal prosecution, taxpayers are well advised to be aware of it up front. 

New York Voluntary Disclosure Essentials 

The basic procedure involved with the New York State VDCP is pretty straightforward.  New Yorkers pursuing the program fill out an application, available online, and disclose the taxes they owe the State.  The taxpayer then puts together a plan to pay those taxes, and signs a special agreement to pay all future tax obligations. Significantly, if a taxpayer signs the latter agreement and later violates it, New York can use the VDCP information against the taxpayer. In other words, the benefits of the VDCP hinge on continued New York State tax compliance.  Without future compliance,  the unique benefits conferred by the Voluntary Disclosure & Compliance Program collapse. 

Eligibility of VDCP for New York Taxpayers 

The eligibility requirements for New York taxpayers interested in the VDCP are straightforward.  First, the taxpayer must not be under audit by the Department of Taxation and Finance for the year(s) in question.  Second, the taxpayer can not have already received a bill for any of the tax debts in question.  Third, the taxpayer can not be under criminal investigation for those tax debts by a New York State agency or one of its political subdivisions.  Lastly, the tax debts can not emanate from a federal or New York State reportable tax shelter transaction.

The VDCP is a broad program.  It applies to all types of tax debt owed to the State of New York.  That includes corporate income tax, personal income tax, and sales tax. Taxpayers may also decided to apply for the “limited look-back” relief which is given to certain qualifying persons.  Taxpayers should also note that New York City also has its own version of the VDCP.  It pertains to taxes specifically owed to NYC; and is an area we will cover in a future blog post.  

New York Voluntary Disclosure Tax Attorneys

Whether a taxpayer should elect to use New York’s Voluntary Disclosure & Compliance Program always depends on their particular facts and circumstances. The VDCP is especially useful in cases involving misconduct or fraud.  That’s because it may provide an outlet for relief for such cases.  Nonetheless, taxpayers have to be fully aware of the limitations of the Voluntary Disclosure program. The New York tax lawyers at Mackay, Caswell & Callahan are fully conversant with the provisions of the VDCP.  We’d be happy to walk you through the Voluntary Disclosure provisions if you have such a need. After reviewing your case, one of our top New York City tax attorneys can walk you through your options. Whatever we decide, we guarantee that your best interests will inform our decision-making process. Give us a call today so that we can get started on your case! 

Image credit: Bud Ellison