IRS Plans Lower Crypto Tax Disclosure Penalties in 2026

The US Internal Revenue Service (IRS) plans to overhaul its voluntary disclosure program, reducing penalties for taxpayers who report past tax violations and accelerating case resolution. According to Forbes, the revised program is expected before December, with a target of resolving cases within 120 days of taxpayers completing the required submission process. IRS Criminal Investigation Chief Jarod Koopman outlined the proposal at the UCLA Extension Tax Controversy Conference.

Cryptocurrency-related violations would not receive a separate disclosure process. The IRS would handle digital assets through the same voluntary disclosure procedures used for other tax noncompliance, with penalties described as substantially lower than current levels. Koopman did not disclose specific figures, but the agency is considering installment plans and offers in compromise as alternatives to immediate payment. The current process can take a year or longer to complete.

The existing program is intended for taxpayers whose willful failure to comply with tax law could result in criminal prosecution. It is not designed for unintentional reporting errors. That distinction matters for crypto investors who may have made mistakes rather than deliberately concealed tax obligations, a group the proposed changes do not yet explicitly accommodate.

Lawmakers are pursuing a separate framework for crypto taxpayers. Section 502 of the proposed Digital Asset Tax Certainty Act would establish a voluntary disclosure process for correcting past violations, including unintentional reporting errors, with defined penalties. The legislation cleared the House Ways and Means Committee in September, but its final adoption and implementation remain separate from the IRS’s planned program overhaul.