IRS Removes Willfulness Checkbox from Form 14457, Easing Path for Voluntary Disclosures

In short, the removal of the willfulness checkbox from the updated VDP form incentivizes taxpayers who were previously wary about admitting that they had willfully failed to disclose information to the IRS to – after consultation with their advisors and attorneys – reconsider whether entering VDP is a viable and wise option in their situation.

Background: The Role of Form 14457

Form 14457 is used by taxpayers seeking to voluntarily disclose previously unreported income or tax noncompliance in order to avoid criminal prosecution. The form operates in two parts: Part I is a preclearance request to determine eligibility, and Part II is the formal disclosure. Since the 2018 overhaul of the VDP, the IRS has emphasized that the program is intended for taxpayers with potential criminal exposure, not merely civil liability.

The Willfulness Checkbox Controversy

The willfulness checkbox, which was present on prior versions of Form 14457, was introduced in 2022 and expanded in 2024, and it required taxpayers to affirm under penalty of perjury that their noncompliance was willful. This raised serious legal and ethical concerns. Taxpayers were effectively asked to admit to criminal behavior before being accepted into the program, with no guarantee of protection from prosecution. This raised concerns of self-incrimination: should the taxpayer not be admitted into the program the admission on the Form 14457 could be used against the taxpayer in future civil and criminal tax proceedings as proof of willfulness.

Tax professionals and the National Taxpayer Advocate (NTA) argued that this requirement created a “Catch-22”: taxpayers who were unsure whether their conduct met the legal threshold for willfulness were forced to either risk perjury or forgo the benefits of the VDP. In her 2024 Annual Report to Congress, NTA Erin Collins listed the checkbox as one of the “Most Serious Problems” facing taxpayers and called for its removal.

IRS Responds to Advocacy

In June 2025, the IRS agreed to eliminate the checkbox, a decision praised by both the NTA and the broader tax community. The July 2025 revision of Form 14457 reflects this change, removing the checkbox from Part II and updating instructions accordingly. The IRS also clarified that taxpayers are still expected to provide a detailed narrative of their noncompliance, but without making an explicit legal admission of willfulness.

Additional Updates to Form 14457

Beyond the removal of the checkbox, the July 2025 version of Form 14457 includes several other updates:

• Digital Assets: The form now requires detailed reporting of all domestic and foreign digital asset transactions related to tax noncompliance. This includes wallet addresses, transaction hashes, and use of mixers or tumblers. Critics argue that the volume of data required at the preclearance stage may discourage participation, especially among taxpayers with complex cryptocurrency activity.
• Direct Pay Option: The IRS has added Direct Pay as a payment method, allowing taxpayers to prepay liabilities online. This change aims to reduce misapplied payments and streamline the process.
• Executor Guidance: New instructions clarify how executors should complete the form on behalf of deceased taxpayers, including how to report estate-related noncompliance.
• Communication Preferences: Taxpayers can now opt to receive correspondence via encrypted email, addressing prior concerns about data security.

Ongoing Concerns

While the removal of the willfulness checkbox is widely seen as a victory, other aspects of the VDP remain contentious. The IRS continues to require full payment of tax, interest, and penalties before closing a case, with limited flexibility for installment agreements. There is also no right to appeal the IRS’s determination, a policy the NTA has criticized as unfair and counterproductive.

Moreover, the penalty structure remains rigid. A 75-percent civil fraud penalty is typically applied to the year with the highest tax liability, and willful FBAR penalties are assessed according to strict guidelines. These penalties can be severe, especially for taxpayers with offshore accounts or digital assets.

Conclusion

The IRS’s decision to revise Form 14457 and remove the willfulness checkbox represents a meaningful step toward making the Voluntary Disclosure Practice more accessible and less punitive. While challenges remain—particularly around digital asset reporting and payment flexibility—the change signals a willingness by the IRS to engage with stakeholders and improve tax administration.

As the IRS continues its broader review of the VDP, tax professionals and advocates will be watching closely to see whether additional reforms follow. For now, the July 2025 revision of Form 14457 offers a more navigable path for taxpayers seeking to come into compliance and avoid criminal liability.