Agency Prepares Program Overhaul

The U.S. Internal Revenue Service is preparing a major revision to its voluntary disclosure program that would lower penalties and accelerate case handling for taxpayers who come forward to address past tax noncompliance. The changes would apply to matters involving digital assets as well as other forms of tax issues. IRS Criminal Investigation Chief Jarod Koopman outlined the plans in remarks at the UCLA Extension Tax Controversy Conference, according to recent reporting.

Koopman stated that the agency aims to introduce the updated program before December. Officials are targeting resolution of cases within 120 days after taxpayers complete the required submission steps. The current process can often take a year or longer to conclude, particularly when investigation and evaluation are involved.

Specific penalty amounts have not been disclosed. The IRS is also examining greater settlement flexibility, including the potential use of installment plans or offers in compromise to address outstanding tax liabilities.

Crypto Cases to Follow Existing Framework

Digital asset matters would be processed through the same voluntary disclosure procedures applied to other categories of tax noncompliance. The agency does not plan to create a dedicated pathway exclusively for cryptocurrency-related issues. The existing program is structured for taxpayers whose willful failure to comply could expose them to criminal prosecution. It is not designed for those correcting unintentional reporting errors.

This approach keeps crypto enforcement aligned with broader standards used in criminal tax investigations. Taxpayers with complex transaction histories across multiple platforms or time periods would still need to assess whether their circumstances involve willful conduct or accidental mistakes when evaluating available options.

Legislative Alternative Under Consideration

In parallel, lawmakers are advancing a separate measure that could create a distinct process for digital asset tax issues. Section 502 of the proposed Digital Asset Tax Certainty Act would establish a pathway for correcting past violations with defined penalties. The proposal is intended to cover situations that include unintentional reporting errors, distinguishing it from the IRS program’s focus on willful noncompliance.

The bill cleared the House Ways and Means Committee in September. Under the House version, the Treasury Department would have 12 months after enactment to establish the program. Eligible taxpayers could then amend affected returns during a 24-month window after the program opens. Penalties would vary based on the timing of the filing, with lower amounts available to those who come forward earlier. Participants would need to certify that their violations were neither fraudulent nor willful.

Practical Implications for Taxpayers

The combination of administrative and legislative developments creates two potential routes for addressing crypto-related tax gaps. The IRS revision focuses on making the existing willfulness-oriented program faster and less costly. The congressional proposal seeks a statutory mechanism tailored to digital asset reporting corrections, including non-willful errors.

Until the IRS releases detailed guidance on eligibility criteria, exact penalty calculations, and the operation of any settlement options, taxpayers cannot fully quantify the impact of the planned changes. Monitoring both the agency’s formal updates before December and the progress of the Digital Asset Tax Certainty Act will be essential for those evaluating remediation strategies.