If a company`s voluntary disclosure agreement or VDA is accepted, there are strict deadlines for obtaining all the benefits of the Voluntary Disclosure Agreement program. Keep in mind that a voluntary disclosure agreement is a legal agreement between the company and the state. Therefore, there are very clear results that need to be provided by the company, as well as a rigorous schedule as to when these items should be made available. Like almost everything in revenue and usage tax, these deadlines vary from state to state, but an experienced VAT advisor will know these deadlines and will be assured that his client will meet them. In voluntary disclosure agreements, most states will allow a company to estimate its past commitments, which will simplify the process. With a few exceptions, Excel calendars for calculating tax liabilities are accepted instead of filing all previous VAT returns. States are prepared to make these concessions to facilitate the process, as the main objective of states is to promote voluntary compliance with future and ongoing tax collection and reporting obligations. In short, the state is prepared to forego some formal revenues and even some to curb new taxpayers. There are several pitfalls that a company should follow when it has a voluntary disclosure agreement. The subject must come forward and request the VDA from a Member State before receiving requests, communications or audit notices from the State concerned.
Some states limit these requests, communications or audit communications to the specific nature of the disclosed tax, while others extend it to all state-administered taxes. This is the most common misunderstanding about voluntary disclosure agreements. The key is that it is a “voluntary” confession… If the state contacts you on its own about certain tax breaches, the state does not see things as you voluntarily register. A voluntary disclosure agreement is a legal agreement between a state tax authority and a company that acknowledges that it has not complied with its compliance obligations with respect to sales and usage taxes. The voluntary disclosure agreement will allow the company to make all necessary registrations within the state and fulfill all remaining tax commitments. At the end of the voluntary disclosure agreement program, the company has regular monthly, quarterly or annual reporting obligations with the government based on the volume of government activity. Companies considering a voluntary disclosure program have options.
You can complete and submit your own application or work with a professional who can help you navigate the process and prepare a VDA. Most applications are 2 to 3 pages long and require an explanation of the applicant`s type of activity, state activity and reasons for the application. VDAs reward voluntary compliance. If you wait for a state to “catch” you to move forward, you don`t really come voluntarily, so the same benefits don`t apply. A VDA is a mandatory agreement between a subject and a state that is supposed to promote compliance with state tax law. In general, VDAs reduce or waive penalties, limit waiting times (a state`s holding period may make a tax payer liable) and provide some protection for tax payers who proactively post previous tax obligations, pay what they owe, and comply with government tax laws that advance.