IRS Plans Lower Penalties and 120-Day Resolution Under Overhauled Voluntary Disclosure Program
Key Takeaways
- •The IRS plans to introduce a revised voluntary disclosure program before December that would substantially reduce penalties and resolve cases within 120 days of a completed submission, compared with the current timeline of a year or longer.
- •Cryptocurrency-related violations will be processed through the same voluntary disclosure procedures as other forms of tax noncompliance, without a separate digital asset track.
- •The agency has not yet published the revised program's terms or penalty amounts, but is considering additional flexibility such as installment plans or offers in compromise.
- •The existing voluntary disclosure program is aimed at taxpayers facing potential criminal prosecution for willful noncompliance, not those who made unintentional reporting errors.
- •Lawmakers are separately weighing the Digital Asset Tax Certainty Act, whose Section 502 would establish a defined-penalty correction process for crypto taxpayers including unintentional errors, and the bill cleared the House Ways and Means Committee in September.
The US Internal Revenue Service (IRS) is preparing an overhaul of its voluntary disclosure program, with plans to reduce penalties and accelerate the resolution of tax violations — including those involving cryptocurrencies — according to a Friday report by Forbes.
Jarod Koopman, chief of IRS Criminal Investigation, said the agency aims to introduce the revised program before December, with a target of resolving cases within 120 days of a taxpayer completing the required submission process. That timeline would mark a notable shift from the existing procedure, which can take a year or longer to complete, Forbes reported. As of the report, the agency had not published the revised program's terms or the penalty amounts it would carry.
The overhaul would not establish a separate disclosure track for digital assets. Speaking at the UCLA Extension Tax Controversy Conference, Koopman told attendees that violations involving cryptocurrencies would be handled through the same voluntary disclosure procedures applied to other forms of tax noncompliance.
The IRS official also indicated that penalties under the revised program would be substantially lower than those currently imposed, although he did not provide specific figures. The agency is considering additional flexibility for taxpayers, including the option to settle outstanding liabilities through installment plans or offers in compromise.
The current voluntary disclosure program is designed for taxpayers whose willful failure to comply with tax laws could expose them to criminal prosecution, rather than those who made unintentional reporting errors. Such programs have long served as a channel for taxpayers facing criminal exposure to come forward and regularize their affairs, and US authorities have sharpened their focus on digital asset reporting in recent years as cryptocurrency adoption has grown.
Separately, lawmakers are weighing a dedicated voluntary disclosure framework aimed at 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, unlike the IRS's existing program, which primarily addresses willful tax noncompliance. The bill cleared the House Ways and Means Committee in September — an early procedural step, as it would still need passage by the full House and Senate before it could become law.
Source: Cointelegraph
