IRS Plans Faster Voluntary Tax Disclosures With Lower Penalties for Crypto

The IRS is preparing to make voluntary disclosure less costly and faster, including for taxpayers with crypto-related violations. The proposed changes could cut case resolution from a year or more to a target of 120 days after taxpayers submit the required materials. That would be a substantial change in the experience of resolving a tax case, though the target remains a goal described by the agency rather than a guaranteed deadline. The distinction matters: taxpayers would still need to understand what the program covers, what records they must provide, and what penalties or payment terms apply.

One process for crypto and other tax violations

IRS Criminal Investigation Chief Jarod Koopman said the agency aims to introduce the revised program before December, according to a Friday Forbes report. Speaking at the UCLA Extension Tax Controversy Conference, Koopman said digital assets would use the same disclosure procedures as other forms of tax noncompliance. That points toward a single administrative route for people whose cases involve crypto, rather than a separate process built around the asset type. It doesn't, by itself, explain how the IRS would treat every kind of crypto transaction or reporting failure.

The move reflects a practical problem for tax administrators: new asset types can complicate reporting, but the basic work of reviewing an incomplete or inaccurate return still involves records, liabilities, and a taxpayer's conduct. A shared process could give the agency and taxpayers a more familiar structure for addressing those issues. The details will determine whether that structure is clear enough to use. For people with digital asset activity, a consistent procedure may reduce uncertainty about where to start, but it won't make the underlying tax questions disappear.

The IRS is considering substantially lower penalties, though Koopman gave no figures. Taxpayers may also be able to pay outstanding liabilities through installment plans or offers in compromise. Those possibilities could make disclosure more accessible to people who can't pay a full balance at once, but the available information doesn't establish who would qualify or how the agency would set terms. The financial effect will depend on the eventual rules, including how penalties are calculated and how payment arrangements are assessed.

This is more significant than it looks: a shorter process and lower penalties could change the calculation for people weighing whether to come forward. Yet the proposal's value can't be judged from the headline features alone. The eligibility rules, required documentation, and treatment of different forms of noncompliance will shape whether taxpayers can use it with confidence. Until those terms are published, the program remains a direction of travel rather than a fully specified offer.

Different routes for willful and accidental errors

The current IRS program is designed for taxpayers whose willful failure to comply could expose them to criminal prosecution. It isn't intended for people who made unintentional reporting errors. That distinction separates a disclosure route aimed at serious, deliberate noncompliance from the more routine problem of correcting a mistake. Similar systems typically draw lines between conduct based on intent, because the agency's response may depend on whether a failure was deliberate or accidental.

That boundary is important for crypto users, whose reporting problems may vary widely. A person who intentionally concealed taxable activity and someone who misunderstood a reporting obligation shouldn't assume they're dealing with the same process. The source describes the current program's intended scope, but it doesn't spell out how the IRS would evaluate individual cases or what evidence would establish intent. Taxpayers considering a correction will need to pay close attention to the program's criteria once the agency publishes them.

Lawmakers are considering a separate route for crypto taxpayers who want to correct past mistakes. Section 502 of the proposed Digital Asset Tax Certainty Act would set out a disclosure process with defined penalties. The bill cleared the House Ways and Means Committee in September. That committee action marks progress in the legislative process, but the source doesn't say that the bill has become law or that its proposed process is already available.

The two efforts address related but distinct concerns. The IRS is preparing changes to its voluntary disclosure program, while the proposed legislation would create a defined route for taxpayers correcting past crypto mistakes. Their overlap could make the eventual options easier to compare, or it could leave taxpayers asking which route applies to their circumstances. The available details aren't enough to resolve that question.

What taxpayers should watch

For now, the most concrete points are the agency's intended timing, its proposed 120-day target after required materials are submitted, and its consideration of lower penalties and payment options. Each is still subject to details that haven't been provided here. The timeline also appears to begin only after a taxpayer submits the required materials, so the time needed to prepare a complete submission may sit outside the stated target. A faster resolution target doesn't necessarily mean a quick or simple process from the taxpayer's point of view.

If you're working in this space, the key question is how the IRS will define eligibility and documentation, not just how soon it hopes to close cases. Clear instructions could help taxpayers distinguish a willful disclosure from a correction of accidental errors. Ambiguous standards could leave that distinction difficult to apply. (And this is the part most people overlook.) Procedure can matter as much as the headline penalty reduction.

There are still open questions. The agency hasn't supplied penalty figures, and the article doesn't describe the mechanics of installment plans or offers in compromise under the proposed changes. Nor does it establish how the IRS program would relate to the bill's separate proposed route. Those gaps limit what taxpayers can reasonably conclude today. A faster, less costly path may be the goal. The terms will decide whether it becomes one.

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