IRS Preparing Streamlined Disclosure Program With Reduced Penalties
The US Internal Revenue Service is moving to revamp its voluntary disclosure framework, with the goal of lowering financial penalties and significantly cutting the time it takes to resolve outstanding tax violations. The planned changes would explicitly cover cases involving cryptocurrencies, as first reported by Forbes on Friday.
Jarod Koopman, who heads the IRS Criminal Investigation division, outlined the agency's intentions while speaking at the UCLA Extension Tax Controversy Conference. He indicated that the revised program is expected to be in place before the end of December and that the IRS aims to close out cases within 120 days of a taxpayer completing the necessary filing steps.
Digital Assets to Follow the Same Path as Other Tax Violations
Notably, the overhaul would not create a dedicated disclosure track for digital assets. Koopman made clear to the conference audience that the IRS intends to process cryptocurrency-related tax noncompliance through the same voluntary disclosure mechanisms it already applies to other categories of tax violations. In other words, no parallel or separate crypto-specific procedure is on the table.
On the penalty front, the IRS official signaled that fines under the new framework would be considerably lower than what taxpayers currently face, though he stopped short of disclosing exact numbers. He also noted that the agency is weighing options that would let filers settle their outstanding obligations via installment payment plans or offers in compromise, providing greater flexibility for those in the process of coming into compliance.
A Shift From the Current Lengthy Process
According to Forbes, the existing voluntary disclosure route can stretch beyond a year before a case is fully resolved. The current program is specifically designed for taxpayers whose deliberate, willful failure to report income or file returns could trigger criminal prosecution. It is not intended for individuals who made good-faith reporting mistakes.
The proposed overhaul represents a meaningful departure from that timeline and scope, offering a faster path to resolution and a more forgiving penalty structure. Taxpayers and their advisors have long called for a more accessible process, and the changes under consideration appear to respond to that pressure.
Congress Weighs a Separate Crypto-Focused Disclosure Bill
In parallel, members of Congress are advancing a distinct voluntary disclosure mechanism tailored to cryptocurrency taxpayers. Section 502 of the proposed Digital Asset Tax Certainty Act would create a dedicated channel for correcting past crypto tax violations, with clearly defined penalty levels. Unlike the IRS program, which primarily targets willful noncompliance, this legislative proposal would also encompass taxpayers who made unintentional reporting errors.
The bill successfully passed through the House Ways and Means Committee in September, setting up a potential legislative track that could complement or run alongside the IRS's administrative changes. If both initiatives move forward, US taxpayers dealing with crypto-related tax issues could find themselves with more options and a less punitive environment than before.