IRS to Reduce Tax Disclosure Penalties, Including for Crypto: Forbes

The U.S. Internal Revenue Service (IRS) is preparing to revise its voluntary disclosure program, with plans to reduce penalties and speed up case resolution for taxpayers who come forward to address tax noncompliance—potentially including violations involving cryptocurrencies. The development was reported by Forbes, citing comments from IRS Criminal Investigation Chief Jarod Koopman.

Koopman said the agency is working toward introducing the updated program before December. The IRS’s goal, as described in the report, is to resolve cases within 120 days after taxpayers complete the submission process required to participate.

Key takeaways

• The IRS is considering lower penalties and faster timelines for its voluntary disclosure program, with a reported target of resolving cases within 120 days after submission.
• IRS leadership indicated digital assets would be handled under the same voluntary disclosure framework as other tax issues, rather than through a dedicated process for crypto.
• Details on the magnitude of penalty reductions were not provided, but the reported direction is toward substantially lower consequences than the current program.
• Legislators are also advancing a separate track for crypto taxpayers through the proposed Digital Asset Tax Certainty Act, which would treat unintentional reporting errors differently from willful noncompliance.

What the IRS overhaul would change

According to Forbes, the IRS Criminal Investigation division is planning an overhaul designed to make the voluntary disclosure route more attractive by addressing two pain points: penalty levels and the time required to reach resolution. Koopman told attendees at the UCLA Extension Tax Controversy Conference that the revised approach would aim to resolve cases within 120 days after taxpayers finish the required submission steps.

While the IRS official did not specify exact penalty amounts, the report says the agency intends penalties under the revised program to be substantially lower than those currently imposed. The IRS is also reportedly considering settlement flexibility, including installment plans or offers in compromise for outstanding tax liabilities.

For taxpayers weighing disclosure versus other options, the main practical question is how the promised timeline and penalty reductions would work in real cases—especially for individuals and entities with complex records. The current voluntary disclosure pathway is described by Forbes as a process that can take a year or longer, particularly where investigation and evaluation are involved.

How cryptocurrencies fit into the IRS program

A central detail in the report is that the IRS does not appear to be planning a separate voluntary disclosure procedure tailored exclusively to digital assets. Koopman’s remarks, as summarized by Forbes, suggest that cryptocurrencies would be treated through the same voluntary disclosure framework used for other categories of tax noncompliance.

This matters for crypto participants because the IRS’s existing voluntary disclosure program is meant for taxpayers whose willful failure to comply could expose them to criminal prosecution, rather than those who made unintentional mistakes. In that context, the IRS’s approach could be seen as keeping crypto enforcement aligned with broader criminal investigation standards—even if the program’s mechanics and penalties are changed.

That said, if the IRS truly narrows penalties and shortens the resolution window, the revised process may reduce the deterrent effect that comes from high costs and long uncertainty. Traders, long-term holders, and businesses with reporting gaps will still need to carefully evaluate their facts, because whether conduct is willful versus accidental can determine which framework they should pursue.

A separate legislative track for “honest mistakes”

While the IRS would reportedly use its existing voluntary disclosure structure for digital assets, lawmakers are considering an alternative designed specifically for crypto-related tax issues. Forbes notes that a separate voluntary disclosure program is under consideration in Congress—described in earlier coverage by Cointelegraph as including situations where taxpayers made unintentional reporting errors.

In particular, Section 502 of the proposed Digital Asset Tax Certainty Act would reportedly create a process for correcting past violations with defined penalties. The proposal is positioned as different from the IRS’s current program because it targets both correction and penalty rules for crypto taxpayers, including those whose errors were not willful.

According to the provided context, the bill cleared the House Ways and Means Committee in September. If enacted, it would add a second disclosure route—one aimed at defined remediation for crypto tax reporting gaps, rather than focusing primarily on willful noncompliance and the risk of criminal prosecution.

The divergence between these tracks sets up a practical tension for crypto taxpayers: the IRS revision could make its willfulness-oriented program less punitive and faster, but the legislative proposal suggests there is still demand for a distinct mechanism for unintentional mistakes.

Why the timing and structure matter for crypto taxpayers

For crypto investors and service providers, the biggest impact of the IRS overhaul may be procedural rather than conceptual. The reported 120-day resolution goal suggests the IRS is looking to reduce the lag between submission and outcome—an issue that can be particularly costly for taxpayers who need clarity for planning, compliance remediation, and personal or business cash management.

The other key factor is uncertainty around penalties. Koopman’s comments, as reported by Forbes, point toward “substantially lower” penalties, but without specific figures taxpayers cannot yet estimate savings or compare the revised process to other options. That means readers should treat any near-term assessment as incomplete until more details are released—either in formal IRS guidance or through the program’s updated rules.

Meanwhile, legislative developments may continue to move on a different timetable than the IRS’s administrative changes. If the Digital Asset Tax Certainty Act advances, crypto taxpayers may ultimately have to choose between an IRS pathway tied to willfulness standards and a statutory remedy aimed at correcting errors with defined penalties. In the interim, the most important watch items are how the IRS defines the updated eligibility boundaries for digital asset cases and whether the agency provides clearer guidance on penalty calculations.

Crypto-related tax compliance has often been shaped as much by uncertainty as by complexity. If the IRS follows through on a faster, lower-penalty voluntary disclosure approach before December, it could reduce uncertainty for taxpayers considering remediation—but readers should still monitor legislative progress on the proposed crypto-specific program, since it would address a different class of reporting problems.