Voluntary Disclosure Agreements

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What is a Voluntary Disclosure Agreement?

A voluntary disclosure agreement (VDA) is an arrangement with a state to reduce or waive penalties or interest and limit the look-back period for uncollected taxes.

It has been four years since the landmark Wayfair vs. South Dakota decision. States are now aggressively enforcing their economic nexus rules. So the chances of companies successfully flying under the radar when it comes to sales tax compliance has significantly decreased.

Now is the time to take advantage of programs, like Voluntary Disclosure Agreements, while they still exist. It is not uncommon for states to update or change their policies when it comes to historical sales tax liability.

Our team of sales tax experts will help you conduct a nexus analysis and determine if a VDA can be beneficial under your circumstances.

With a voluntary disclosure agreement, your company’s sales tax liability may be reduced. In other words, by voluntarily choosing to disclose unpaid taxes to the state allows that state to form a compromise with your company. For example, states will generally limit their lookback period to 2-3 years, subsequently restricting the amount of taxes you owe during that period of time. And in some situations, states may agree to lower the interest rate and waive penalties.

How to File a Voluntary Disclosure Agreement​

Contact a Specialist at Source Advisors

A tax specialist will respond promptly and help identify your sales tax nexus exposure and requirements.

We’ll Help You Mitigate Your Potential Liability

Our team will determine if a Voluntary Disclosure Agreement is the appropriate mitigation strategy and proceed to work with the state(s) to file. Your company will remain anonymous during the initial discussions with the state until you decide whether or not to move forward.

We’ll Help You Manage Your Compliance

Our team will negotiate terms and help you better understand your obligations to the state. We will also formulate an ongoing compliance strategy specific to your business needs.

What a Voluntary Disclosure Agreement Can Do for Your Business

A voluntary disclosure agreement can reduce your company’s financial burden in the face of historical sales tax liabilities.

However, applying for a voluntary disclosure agreement isn’t easy. Each state has its own rules for application and qualification. In every state, significant attention to detail is required, and mistakes may lead to rejection – ultimately wasting your time and resources.

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Tax Burden with Source Advisors

For several businesses, discovering unknown tax liabilities seems like a nightmare. Many companies respond by simply registering and filing sales tax returns going forward. However, this can trigger an audit and subsequently lead to a longer lookback period and higher interest paid. Before you start to comply, it is important to evaluate protective options like a Voluntary Disclosure Agreement.

The process of negotiating a voluntary disclosure agreement, with sales tax owed to the state, may uncover additional tax liabilities in that state. Naturally, you only want to undergo the process of filing and negotiating a voluntary disclosure agreement if it’s best for your business. But how do you know for sure? Source Advisors can give you a personalized recommendation based on your company’s unique circumstances.

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Frequently Asked Questions

What is a VDA?

VDA stands for a Voluntary Disclosure Agreement. It is an agreement with a tax authority allowing you to voluntarily disclose unreported tax liabilities and settle them on mutually agreed terms, with reduced look-back period, abated penalties and lower (or waived) interest.

Who can benefit from a VDA?
Businesses or individuals with unreported income, overstated deductions, or other tax errors they want to rectify proactively.
What are the benefits of a VDA?

Reduced look-back period, abated penalties, reduced interest, and peace of mind by resolving past tax issues.

Contact Source Advisors for a Free Assessment

Embrace the power of tax credit savings with Source Advisors and propel your business towards growth and success. Partner with us today to unlock your company’s full potential.