Less Punch, Faster Fixes: IRS Crypto Tax Disclosure Overhaul

The IRS is preparing to reduce penalties and accelerate resolutions under its voluntary disclosure program, including for cryptocurrency-related tax violations, according to a Friday report by Forbes. The agency aims to introduce the revised program before December and resolve cases within 120 days of taxpayers completing the required submission process.

IRS Criminal Investigation Chief Jarod Koopman said digital assets would not receive a separate disclosure process. Speaking at the UCLA Extension Tax Controversy Conference, Koopman said the IRS would handle them through the same voluntary disclosure procedures used for other forms of tax noncompliance.

Penalties under the revised program would be substantially lower than current penalties, although Koopman did not provide specific figures. The IRS is also considering allowing taxpayers to settle outstanding liabilities through installment plans or offers in compromise. The overhaul would replace a process that can take a year or longer.

The IRS’s current program is intended for taxpayers whose willful failure to comply with tax laws could expose them to criminal prosecution, rather than those who made unintentional reporting errors. Lawmakers are separately considering a voluntary disclosure program for crypto taxpayers, including those who made unintentional reporting errors. 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.