Overview
The Texas Voluntary Disclosure Program (VDP), administered by the Texas Comptroller of Public Accounts, allows businesses and individuals to report and pay previously unpaid or underpaid taxes voluntarily. This program incentivizes compliance by offering significant benefits, such as penalty waivers and, in most cases, interest waivers, for those who come forward before being contacted by the Comptroller. It’s beneficial for businesses with tax liabilities from sales, use, franchise, or other taxes managed by the Comptroller.
The program is designed to help taxpayers resolve past tax issues while avoiding the severe consequences of audits or investigations. With Texas collecting approximately $47 billion in sales tax annually, ensuring compliance is critical to avoid penalties and maintain business operations. The VDP is especially relevant for businesses in the growing digital and gig economy, where tax obligations can be complex due to evolving regulations.
At The Wilson Firm, a leading tax law firm in The Woodlands, we specialize in guiding clients through the VDP process to ensure accuracy, compliance, and peace of mind.
Key Points of the Texas Voluntary Disclosure Program
Understanding the core components of the Texas VDP is essential for businesses and individuals considering participation. Below are the key aspects to know:
Eligibility Requirements: To qualify, a taxpayer must not have been previously contacted by the Comptroller regarding the tax liability in question, either verbally or in writing, and must not be under audit or examination. Additionally, the taxpayer must not be under audit or examination for the tax type or period they wish to disclose. This ensures the program is used for voluntary compliance rather than as a response to enforcement actions.
Limited Lookback Period: The program typically limits the lookback period to four years from the date of initial contact with the Comptroller, significantly reducing liability for businesses with long-term non-compliance. However, if the taxpayer collected, but did not remit the sales tax, there is no four-year limit on how far back the Comptroller can look for taxes that were collected from customers but not remitted. The taxpayer must report and remit all collected sales tax.
Penalty and Interest Waivers: Statutory penalties are waived, and interest is often waived for taxes not collected from customers. Interest on collected but unremitted taxes is still applicable.
Criminal prosecution: In Texas, intentionally collecting sales tax from customers but failing to remit it to the state can lead to criminal prosecution, with felony charges and prison time possible depending on the amount involved. The Texas VDP typically prevents the Comptroller from pursuing criminal charges related to the disclosed tax issues, though this is not a guarantee and depends on the specific circumstances.
Anonymity Option: Taxpayers can initiate the process anonymously through a representative, such as The Wilson Firm, to assess eligibility without disclosing their identity upfront.
Steps to Participate in the Texas VDP
Participating in the Texas VDP involves a structured process that requires careful attention to detail to ensure compliance and maximize benefits. The Wilson Firm can manage this process on your behalf, streamlining each step and reducing the risk of errors. Here’s how it works:
1. Initial Contact: A company representative or authorized agent, such as The Wilson Firm, contacts the Comptroller’s Business Activity Research Team (BART) in writing, either anonymously or with the business name. The submission should outline the nature of the tax liability, the tax types involved, and the periods for which taxes are owed.
2. Review and Agreement: BART reviews the submission for eligibility. If approved, they prepare a Voluntary Disclosure Agreement (VDA) and send it to the representative for review and signature.
3. Submission of Data and Payment: After signing the VDA, the taxpayer has 60 days to register for a sales tax permit (if applicable), file necessary returns, and remit the owed taxes. For businesses with complex or multi-state operations, this step requires meticulous record-keeping to ensure accuracy.
4. Finalization: Once BART processes the returns and payment, the taxpayer receives a signed agreement and a statement of account.
Benefits of Resolving Tax Liabilities Through the VDP
The Texas Voluntary Disclosure Program offers numerous advantages for businesses seeking to resolve past tax liabilities. Beyond the immediate financial benefits of penalty and interest waivers, participation in the VDP provides long-term benefits that contribute to a business’s stability and growth. These include:
Financial Savings: By waiving penalties and, in many cases, interest, the VDP significantly reduces the cost of resolving tax liabilities. For businesses with substantial unpaid taxes, these savings can be transformative, freeing up capital for other operational needs.
Risk Mitigation: Proactively addressing tax issues through the VDP minimizes the risk of audits, investigations, or legal actions by the Comptroller. This proactive approach demonstrates good faith and can prevent costly disputes or penalties in the future.
Improved Compliance: Participating in the VDP allows businesses to establish a clean slate and implement proper tax reporting practices moving forward. This is particularly important for businesses in the digital or gig economy, where tax regulations are constantly evolving.
Enhanced Reputation: Resolving tax liabilities voluntarily reflects a commitment to ethical business practices. This can enhance your business’s reputation with customers, partners, and regulators, fostering trust and credibility.
Why Choose The Wilson Firm
Navigating the Texas Voluntary Disclosure Program can be daunting, especially for businesses with limited experience in tax compliance or those facing significant liabilities. The Wilson Firm offers unparalleled expertise and personalized support to guide you through the VDP process. Here’s why partnering with us is the right choice:
Specialized Expertise: Our tax attorneys have in-depth knowledge of Texas tax laws and the Comptroller’s procedures, ensuring accurate eligibility assessments and seamless filings.
Tailored Strategies: We customize each VDA application to your business’s unique circumstances, whether you’re a small local firm or a multi-state corporation with complex tax obligations.
Anonymity and Discretion: We handle anonymous submissions to protect your privacy while assessing eligibility and potential liabilities, giving you confidence in the process.
Audit Defense: Our team prepares thorough documentation to minimize the risk of future audits and provides robust defense strategies if an audit occurs.
Comprehensive Support: From initial contact to final payment, we manage every aspect of the VDP process, including Fast-Track options for urgent cases and coordination for multi-state disclosures.
Proactive Compliance: Beyond the VDP, we help you establish ongoing tax compliance practices to avoid future liabilities and maintain good standing with the Comptroller.
Frequently Asked Questions
The Texas VDP allows businesses and individuals to report and pay unpaid taxes voluntarily, offering penalty waivers and, often, interest waivers before Comptroller contact.
Taxpayers not contacted by the Comptroller or under audit for the tax type/period can participate. Anonymity is allowed through a representative like The Wilson Firm.
The VDP waives penalties, often interest, reduces audit risks, ensures compliance, and enhances business reputation by resolving tax liabilities proactively.
Contact the Comptroller’s BART in writing, review the VDA, submit data and payment within 60 days, and finalize with a signed agreement.
The Wilson Firm provides expert guidance, tailored VDA strategies, anonymous submissions, audit defense, and ongoing compliance support for seamless VDP participation.
Stay Compliant with The Wilson Firm
The Texas Voluntary Disclosure Program offers businesses and individuals a valuable opportunity to resolve past tax liabilities, reduce penalties, and achieve compliance with Texas tax laws. By addressing unpaid or underpaid taxes proactively, you can avoid the financial and operational risks associated with audits or enforcement actions. However, the VDP process requires precision, thorough documentation, and a deep understanding of Texas tax regulations to achieve the best outcomes.
Partnering with The Wilson Firm ensures that your business navigates the VDP effectively and efficiently. Our experienced tax attorneys are dedicated to helping you resolve tax challenges and secure your financial future. Contact us today at The Wilson Firm to schedule a consultation and learn how we can help you achieve compliance through the Texas Voluntary Disclosure Program.
Disclaimer: The Wilson Firm PLLC provides this information as a public service for general information only. The materials contained herein may not reflect the most current legal developments. Such material is not intended as legal advice or as a substitute for the particularized advice of your own counsel, and no person should act or refrain from acting based on any information contained in this website without seeking appropriate legal or other professional advice on that person’s particular circumstances. The Wilson Firm PLLC and all contributing authors expressly disclaim all liability to any person with respect to the contents of this website, and with respect to any act or failure to act made in reliance on any material contained herein. The articles, blogs, and other information on this website are provided as is without warranty of any kind, either express or implied, including but not limited to the implied warranties of merchantability, fitness for a particular purpose, or non‐infringement.
Why Hire Us?
At The Wilson Firm, we provide strategic and personalized representation tailored to each client’s unique situation. Whether you’re facing a tax dispute, government investigation, or enforcement action, our team works closely with you to assess risk, identify opportunities, and pursue the best possible outcome.
We understand that legal matters can be complex and overwhelming. Our role is to simplify that complexity—handling communications with tax authorities, developing a clear strategy, and guiding you through each step with confidence.
From high-stakes disputes to proactive planning, we are committed to protecting your interests and delivering practical, results-driven solutions.
Contact us today to learn how our experience and approach can help you move forward with clarity.
