IRS Plans Lower Crypto Tax Disclosure Penalties, Faster Reviews

The US Internal Revenue Service is preparing to overhaul its voluntary disclosure program, targeting lower penalties and faster resolutions for taxpayers who report past tax violations, including those involving cryptocurrency, according to Forbes.

IRS Criminal Investigation Chief Jarod Koopman said the agency aims to launch the revised program before December and resolve cases within 120 days of taxpayers completing the required submission process. Speaking at the UCLA Extension Tax Controversy Conference, Koopman said digital assets would not receive a separate IRS disclosure track; they would be handled through the same voluntary disclosure procedures as other tax noncompliance. Cases under the current program can take a year or longer.

The proposed changes would substantially reduce penalties, although Koopman did not specify the amounts. The IRS is also considering installment plans and offers in compromise, giving taxpayers more flexibility to settle outstanding tax liabilities. The existing program is intended for willful noncompliance that could lead to criminal prosecution, rather than unintentional reporting errors.

Separately, lawmakers are developing a crypto-focused voluntary disclosure route for taxpayers who made unintentional mistakes. Section 502 of the proposed Digital Asset Tax Certainty Act would establish defined penalties for correcting past violations, and the legislation cleared the House Ways and Means Committee in September.