Voluntary Disclosure

A voluntary disclosure agreement (VDA) is a formal arrangement between a taxpayer and DOR that resolves past-due tax obligations on favorable terms. The core trade is straightforward: the taxpayer comes forward voluntarily, and in return, DOR typically offers a reduced lookback period (usually four years instead of the full statutory period) and waiver of penalties. Interest still accrues, but the total cost is almost always significantly less than what would result from a DOR-initiated audit.

Washington operates several VDA tracks. The general program covers B&O, sales, and use tax obligations. The investment income program addresses businesses with Washington-sourced investment income that may not have been reported. The international remote seller program provides a pathway for foreign businesses that exceeded Washington's economic nexus thresholds. Each track has different eligibility requirements, lookback rules, and documentation expectations.

Eligibility is the critical threshold: a taxpayer must not have previously registered with DOR for the tax types at issue, must not be under audit or investigation, and must come forward before DOR initiates contact. Once DOR reaches out first, the VDA option is generally off the table. The disclosure itself must include a complete and accurate presentation of the facts, a calculation of the tax owed under the agreed lookback period, and a commitment to register and file going forward.