IRS Plans Faster Tax Disclosures With Lower Penalties for Crypto Cases

IRS Criminal Investigation Chief Jarod Koopman said the agency plans to revise its voluntary disclosure program, seeking lower penalties and faster resolutions for taxpayers who disclose past tax violations, including matters involving cryptocurrency.

Koopman said the IRS aims to introduce the revised program before December and wants to resolve cases within 120 days after taxpayers complete the required submission process. The 120-day target is measured from completion of that process.

Koopman said penalties under the revised program would be lower than current levels, but did not provide specific penalty figures. The IRS is considering installment plans and offers in compromise for outstanding tax liabilities.

Crypto cases would follow the same voluntary disclosure procedures as other forms of tax noncompliance, rather than a separate digital asset process. The proposed change would revise the IRS’s existing program, which can take a year or longer to complete.

The existing program serves taxpayers facing possible criminal prosecution for willful tax violations. It is not designed for people correcting unintentional reporting errors.

A separate proposal in Congress would create a digital asset-specific process for correcting past violations, with defined penalties. The House Ways and Means Committee approved the Digital Asset Tax Certainty Act in September. The bill would establish a correction route for past digital asset tax returns, distinct from the IRS’s planned revision to its existing disclosure process.

Under the House proposal, Treasury would have 12 months after enactment to set up the program. Eligible taxpayers could amend affected returns during the 24 months after it opens, with penalties that vary by filing timing. The House proposal would set lower penalties for early filers, and eligible filers would have to certify that their violations were not fraudulent or willful.