Voluntary Disclosure Agreements

Get a heads up about risk and potential audits.

Voluntary Disclosure Agreements (VDAs) are legal agreements between taxpayers and state and local tax authorities that allow taxpayers to declare any unreported taxes or unknown liabilities they may have incurred. These agreements are typically used by businesses identifying past tax exposure in a state and wanting to get on the record and pay the back tax to avoid penalties or state audits.

One of the key benefits of VDAs is that they can provide taxpayers with significant relief from potential penalties that may have been accrued on unreported taxes over time. Additionally, most states allow for a “lookback period,” meaning that the state will limit the amount of years to go back and assess the tax.

Overall, VDAs can be a useful tool for taxpayers who are concerned about potential tax liabilities, as they can help alleviate the risk of penalties and allow taxpayers to move forward in compliance with all relevant tax laws.

State and Local Tax Planning Services for Your Business

If you believe your business may have some back tax exposure in a state, please contact the State and Local Tax team at DHJJ so we can discuss your options and if a VDA is right for your business.