The North Carolina Voluntary Disclosure Program (VDP) is designed to promote compliance and to benefit taxpayers who discover a past filing obligation and liability that has not been discharged. It applies to taxpayers who have failed to file returns and pay any taxes due to the North Carolina Department of Revenue (NCDOR). It applies to any tax administered by the Department and to any type of domestic or foreign taxpayer that is subject to tax in this State.
VDP does not apply to a taxpayer who files a return but underreports the tax due on the return. This program is also not available to taxpayers who have been suspended by the Secretary of State per G.S. 105-230 and subject to reinstatement under G.S. 105-232.
Voluntary disclosure arises when a taxpayer contacts NCDOR prior to initial contact by this agency concerning the filing of a return and the payment of a tax. Voluntary disclosure includes requests by taxpayers submitted under the Multistate Tax Commission National Nexus Program.
A major component of the VDP is to resolve sales and use, and corporate income and franchise tax liabilities when nexus is the central issue.
- Qualifying for Voluntary Disclosure To qualify for the Voluntary Disclosure Program, a taxpayer must meet all of the following criteria:
- The taxpayer has not been contacted by the Department of Revenue, Internal Revenue Service or Multistate Tax Commission with respect to any tax for which the taxpayer is requesting voluntary disclosure.
- The taxpayer does not have outstanding tax liabilities other than those reported through the voluntary disclosure.
- The taxpayer is not under audit for any tax.
- The taxpayer pays the tax due plus accrued interest within 60 days from the date of acceptance by NCDOR of the voluntary disclosure agreement.
- Upon request, the taxpayer makes records available for audit to verify the amount of the taxpayer’s liability and the accuracy of the representations made by the taxpayer.
- The taxpayer cannot have previously participated in the Voluntary Disclosure Program.
- Benefits of Voluntary Disclosure
A taxpayer whose application for a voluntary disclosure is approved will receive:
- A requirement to file returns and pay tax will be limited to three years for taxes filed annually or thirty-six months for taxes that do not have an annual filing frequency. If the applicant has collected taxes from others, such as sales and use taxes or withholding taxes and not reported those taxes for periods beyond three years or thirty-six months, the requirement to file and pay will be extended to cover those periods. The requirement to file returns and pay taxes for taxpayers discovered through examination that are not registered or non-filers is six years for taxes filed annually or seventy-two months for taxes that do not have an annual filing frequency. Under the VDP, the requirement to file returns and pay taxes for three years or thirty-six months refers to returns that are currently past due. To determine the filing requirement for voluntary disclosure for taxes that are filed annually, a taxpayer would file the most recent return that is past due, plus returns for the two (2) previous years. To determine the filing requirement for taxes that do not have an annual filing frequency, a taxpayer would file the most recent return that is past due, plus returns for the previous thirty-five (35) months.
- Waiver of penalties, unless the taxpayer collected a trust tax such as sales and use tax or withholding tax, but did not pay it to the Department. If trust taxes were collected, the Department will waive all penalties except the 5% penalty for failure to pay the tax when due.
- When applicable, the ability to report the applicable tax liability in a spreadsheet format versus filing a return for each period involved.
- Sixty (60) days from the Voluntary Disclosure Agreement date to determine the liability, and prepare the returns or spreadsheets and pay the amount of tax and interest due.
- How to Apply
Voluntary Disclosure Program
North Carolina Department of Revenue
P. O. Box 871
Raleigh, North Carolina 27602-0871
- Review and Approval of Voluntary Disclosure Requests
NCDOR will review an application for voluntary disclosure and it will be approved, rejected, or a counter proposal made. Once the application has been approved, NCDOR will sign a Voluntary Disclosure Agreement and send it to the taxpayer or representative of the taxpayer for proper signatures.
If NCDOR determines that the taxpayer does not qualify for voluntary disclosure, the taxpayer or representative of the taxpayer will be notified.
In the event of misrepresentation of information and applicable tax data by the taxpayer or representative, the agreement may be voided and the NCDOR may take action as if the agreement does not exist.
- Audits for Voluntary Disclosure Period
NCDOR reserves its right to audit a taxpayer's books and records, subject to the time limits per G.S. 105-241.8. The audit may include all or part of a voluntary disclosure period.
NCDOR will assess any tax determined to be due that was not discharged under the Voluntary Disclosure Agreement. All applicable penalties and interest will apply to additional taxes discovered to be due that have not been paid.
A taxpayer contacted by the Department for the purpose of examination after an application for voluntary disclosure has been submitted, but prior to acceptance of the agreement by NCDOR, may disclose same to suspend audit activity pending acceptance into the VDP.
The Department will not release the identity of a taxpayer that enters into a Voluntary Disclosure Agreement or the terms of the agreement unless the information must be released upon request under the provisions of G.S. 105-259 or existing information exchange agreements.
- Any Questions?
Please call 919-754-2094, or e-mail.