Visit our Tax Updates Page to Discover the Latest Legislation Changes

Voluntary Disclosure Agreements

Rectifying State & Local Tax exposures through disclosure to the state

Schedule Your Free Consultation Today!

    What is a Voluntary Disclosure Agreement (VDA)?

    Given the complex nature of state taxes, multi-state businesses are prone to making mistakes with the collection and remittance of sales tax, and income tax payment requirements. Often, these mistakes can lead to the underpayment or under-collection of these taxes for multiple years.

    The purpose of a Voluntary Disclosure Agreement (VDA) is to come clean with the relevant state and voluntarily backpay taxes owed. Doing so will wipe the slate clean going forward, and enable you to continue operating in the state without fear of not being compliant.

    Who can participate in Voluntary Disclosure Agreement?



    Typically, any taxpayer—individuals, businesses, or entities—who voluntarily come forward and disclose any potential tax liabilities they may have in a specific jurisdiction.

    • When should a taxpayer consider entering into a VDA?

      Taxpayers should consider entering into a VDA when they become aware of unreported or underreported tax liabilities to mitigate penalties and potential legal consequences.

    • What types of taxes can be addressed through a VDA?

      VDAs can generally address various types of taxes, including income tax, sales tax, use tax, payroll tax, and other state or local taxes.

    • What information is typically required for a Voluntary Disclosure Agreement?

      Taxpayers are usually required to provide detailed information about the nature and extent of the unreported tax liabilities, along with supporting documentation.

    • What happens after a taxpayer discloses under a VDA?

      After disclosure, the taxpayer works with the taxing authority to calculate and settle the outstanding tax liabilities based on the negotiated terms of the agreement.

    • Are there specific industries or situations where VDAs are commonly used?

      VDAs are commonly used across industries, particularly for businesses with multistate operations, online sellers, and individuals with complex tax situations.

    • Can a taxpayer negotiate the terms of a Voluntary Disclosure Agreement?

      Oftentimes, VDA terms are statutorily based. Other times, taxpayers can often negotiate terms such as the look-back period for taxes, payment arrangements, and the scope of penalties.

    Benefits for your business

    • Event
      Limited lookback period (3-4 years) of past taxes due
    • Payments
      Avoid penalties altogether that would normally be relevant on unpaid taxes
    • South
      Lower interest amount due
    • Description
      Informal, taxpayer-driven process that avoids intrusive state review and desk audits
    • Inventory
      Remain anonymous throughout the process to avoid triggering an audit as a result of the disclosure

    Great People
    Define our Success

    Leyton’s State & Local Tax (SALT) experts work alongside your accountants and automation solutions to ensure that your business has its SALT affairs in order, providing accurate insights that enable sustainable business expansion. Whether it be identifying state tax exposures, rectifying those exposures, or providing advice on an ongoing basis, our experts will guide you through the complexities of SALT in a value-adding and efficient manner.

    Brian Ess, J.D.

    State & Local Tax Practice Leader
    Linkedin

    Explore
    Our other services

    Contact us to schedule an initial consultation

    Our in-house team of highly experienced scientists, engineers, tax consultants and attorneys would love to answer all your questions and support your compliance.

    Schedule a call arrow_outward arrow_outward