Benefits of VDA programs include:
Limited lookback. Most states limit the number of years that a taxpayer must file to three or four—a significant benefit for a taxpayer operating in a state for many years before becoming aware of a filing requirement.
Penalty waiver. All states waive penalties for taxpayers that enter a voluntary disclosure program and complete its filing requirements. Penalties often run 10% to 50% of the tax liability and can run up to 100% of the tax liability in certain circumstances.
Interest waiver. Fewer states waive interest that’s accrued on tax liabilities. For some states, this is an additional offered incentive.
Financial benefits. State tax reserves reported on financial statements could be released upon resolving liabilities through voluntary disclosure, often resulting in a financial statement benefit because you can eliminate taxes in the years outside of the voluntary disclosure period due to the limited lookback period in addition to abating penalties and in limited instances interest.
Reduced risk on sale. A taxpayer can show that they identified and addressed prior year exposures, which reduces the time and cost of calculating the liability and negotiating the impact on the purchase price.