IRS Overhaul Targets Lower Penalties, Faster Crypto Tax Disclosures

The U.S. Internal Revenue Service is preparing to overhaul its voluntary disclosure program, reducing penalties and accelerating the resolution of tax violations, including those involving cryptocurrencies, according to a Friday report by Forbes. IRS Criminal Investigation Chief Jarod Koopman said the agency aims to launch the revised program before December, with a target of resolving cases within 120 days of taxpayers completing the required submission process. Koopman outlined the plans at the UCLA Extension Tax Controversy Conference.

Under the proposal, digital assets would not receive a separate disclosure track. The IRS would handle crypto tax violations through the same voluntary disclosure procedures used for other forms of tax noncompliance. Koopman indicated that penalties under the revised program would be substantially lower than current levels, though he did not disclose specific figures. The agency is also considering letting taxpayers settle outstanding liabilities through installment plans or offers in compromise. The existing process, by contrast, can take a year or longer to complete and is intended for taxpayers whose willful failure to comply could lead to criminal prosecution, rather than those who made unintentional reporting errors. lawmakers are pursuing a separate route for crypto taxpayers who made inadvertent mistakes. Section 502 of the proposed Digital Asset Tax Certainty Act would establish a process for correcting past violations with defined penalties, and the bill cleared the House Ways and Means Committee in September. The IRS proposal, meanwhile, would keep crypto filings within the agency's broader voluntary disclosure framework.

For crypto investors who failed to report income or transactions correctly, the overhaul could mean a faster and potentially cheaper path to resolving outstanding tax obligations. However, the changes remain plans: no final penalty schedule has been published, and the separate legislative framework for unintentional crypto reporting errors still requires congressional action.