IRS plans to reduce penalties and speed up crypto tax disclosures

The IRS is preparing to make it significantly easier for taxpayers, including crypto holders, to admit past tax mistakes without facing the kind of penalties that have historically made voluntary disclosure feel like a financial punishment. The agency’s overhaul of its Voluntary Disclosure Program is expected to land before December, and the changes are substantial enough to matter for anyone sitting on unreported digital asset gains. IRS Criminal Investigation Chief Jarod Koopman announced the revamped program at the UCLA Extension Tax Controversy Conference, outlining a target of resolving voluntary disclosure cases within 120 days of a completed submission. That is a meaningful compression of the current timeline, which can stretch well beyond a year. What the new program actually changes The revised Voluntary Disclosure Program will feature lower penalties across the board and introduce more flexible payment structures, including installment plans and offers in compromise. For taxpayers who owe back taxes but cannot cover a lump sum, that flexibility is the difference between participation and avoidance. Crypto transactions will fall under the general VDP framework rather than ...