News & Updates

Voluntary Disclosure, Tailored Relief: What Washington Taxpayers Need to Know

by komcons | Jul 10, 2025 | Featured

Washington State will temporarily offer two Voluntary Disclosure Programs (VDPs): the General VDP and the Investment Income VDP. While both of these programs are aimed at encouraging taxpayers to come forward and resolve past tax liabilities, there are some key differences outlined below.

The General VDP is designed for unregistered businesses that have unreported tax obligations—involving sales, use, or business & occupation (B&O) taxes. Eligible applicants can benefit from a reduced look-back period (limited to four years plus the current year) and potentially a full waiver of penalties, though interest will still apply. Applications can be submitted anonymously online and require formal agreement within 30 days of acceptance.

In contrast, the Investment Income VDP specifically benefits businesses that may have misclassified or underreported investment income for B&O tax purposes. This new VDA program is a result of the Antio decision, which clarified that investment income is taxable unless incidental. This program is geared toward taxpayers who previously claimed improper investment income deductions. However, taxpayers may also seek relief from other revenue streams reportable on the combined excise tax return. An additional benefit is that applicants can report revenue without incurring penalties or interest limited to a 4-year plus current year look-back period. This program will only be administered temporarily: July 1, 2025, through April 30, 2026, and July 1, 2026, through April 30, 2027.

In short, the General VDP is broad in scope and applies to a range of tax types and business activities, while the Investment Income VDP is a targeted remedy for taxpayers correcting their B&O tax treatment of investment income. Both offer significant penalty relief and a path to compliance—making early engagement a smart move for at-risk taxpayers.

The following table compares features of the two Washington VDPs:

Features	General VDP	Investment VDP
Applicable Tax Types	Sales, Use, and B&O tax related to all business activities	B&O tax related to investment income deductions
Eligibility	Never registered applicants Collected unremitted retail sales tax will be evaluated on a case-by-case basis	Registered or unregistered businesses with unreported investment income subject to B&O Affiliates of businesses under audit
Ineligibility	Registered or previously registered businesses Businesses that previously reported tax to the Department of Revenue (“DOR”) Businesses contacted by the DOR (audits, registration inquiries, compliance checks or inquiries, and WA BAQ requests) Businesses engaged in tax evasion or misrepresentation of tax liabilities	Subsidiaries or affiliates of businesses already contacted by the DOR Businesses engaged in banking, lending, and security (see RCW 82.04.4281) Businesses under audit or agency enforcement as of July 1, 2025 Other forms of contact will be evaluated on a case-by-case basis
Look-Back Period	4 years + current Unlimited look-back period if business has collected unremitted retail sales tax	4 years + current
Penalty Relief	Possible full waiver of penalties (up to 39%) but interest imposed at the statutory rate 29% late payment penalty applies only to the collected and unremitted retail sales or use tax amounts	Possible full waiver of penalties and interest
Process	Formal online application and agreement	Similar process with focus on investment income data

It is presumed that the City of Seattle (“the City”) will also follow the Antio decision. The City encourages businesses to participate in its VDP which operates similarly to the State General VDP, except the look-back period is 10 years. The City does not have any plans to create a new VDP at this time.

For more information or assistance with applying to either Washington VDP, please contact Mike Roben, John Katsandres, or Caleb Allen at KOM Consulting. Our team can help assess whether you or your business are eligible and ensure compliance with reporting obligations.