Voluntary disclosure to the IRS, D.C., and Maryland.

A disclosure counts only if it is truthful, timely, and complete. The Internal Revenue Manual defines timeliness by what the IRS has done or learned, not by a number of days. Under IRM 9.5.11.9, a disclosure is timely if the IRS receives it before any of three things happens:

• the IRS starts a civil examination or criminal investigation of the taxpayer, or tells the taxpayer it intends to;
• the IRS receives information from a third party, such as an informant, another government agency, or the media, alerting it to the noncompliance;
• the IRS acquires information directly related to the noncompliance from an enforcement action, such as a search warrant, summons, or grand jury subpoena.

Form 14457 asks whether the IRS has notified the taxpayer, a spouse, or a related entity of an examination or criminal investigation, and whether any of them is under criminal investigation by the IRS or any other law enforcement authority. A yes answer may make the taxpayer ineligible.

The D.C. Office of Tax and Revenue runs a Voluntary Disclosure Program for businesses and individuals who are not current in filing District returns. Taxpayers can remain anonymous during the initial application, and OTR says it will not assess penalties or late fees on the disclosed periods. Applications are submitted through MyTax DC. A taxpayer is not eligible if OTR or its representatives have already made contact, if the taxpayer has been filing intermittently, has unreported income on a filed return, or is currently registered and has filed returns for that tax type. OTR says a taxpayer who is not eligible may contact its Voluntary Disclosure Unit for an alternative method to bring the account into compliance. In most cases OTR limits the look-back period to three years, or to the date the taxpayer established nexus in the District, whichever is later. If the taxpayer collected sales tax or gross receipts tax reimbursements from customers but did not remit them, the look-back period is the greater of three years or the date nexus was established. OTR decides each application on its own facts, and real property tax and Qualified High Technology Company liabilities are excluded. For substantial liabilities, OTR may allow a payment agreement through its Collection Division if an adequate upfront payment is made, and a missed scheduled payment may void the agreement and allow OTR to assess additional penalties and interest on the remaining balance.

The Comptroller of Maryland's voluntary disclosure agreement program covers every tax and fee the Comptroller administers, and it is confidential. The Comptroller says it will waive penalties upon payment of the tax and interest. A taxpayer cannot apply if the Comptroller has already made contact about the liability, if the taxpayer is under audit, or if the account already shows a liability for that tax type, and the tax or fees reported for the look-back period must total at least $500. For income tax, the look-back period is the most recent past-due year plus the three years before it. Once both parties have signed the agreement, the taxpayer usually has sixty days to report and pay. A payment plan of up to 24 months is available if requested in the submission, and interest accrues during the plan. The Comptroller may audit the reported amounts, and the agreement is void if any misrepresentation is made.

Official source: D.C. Office of Tax and Revenue, Voluntary Disclosure Program
Official source: Comptroller of Maryland, Voluntary Disclosure Agreement FAQs