IRS Moves to Revamp Voluntary Disclosure Program to Ease Penalties and Speed Resolutions
The United States Internal Revenue Service (IRS) is preparing for a significant overhaul of its voluntary disclosure program. The agency plans to reduce penalties and expedite the resolution of tax infractions, including those related to cryptocurrencies, as reported by Forbes on Friday.
IRS Criminal Investigation Chief Jarod Koopman announced that the agency aims to roll out the updated program by December. The goal is to resolve cases within 120 days after taxpayers complete the necessary submission procedures.
The proposed revision will not create a distinct disclosure process specifically for digital assets. Koopman stated at the UCLA Extension Tax Controversy Conference that the IRS intends to apply the same voluntary disclosure protocols to digital assets as it does for other tax compliance issues.
An IRS spokesperson noted that penalties under the new program would be markedly lower than current levels, though exact amounts were not disclosed. The IRS is also considering options that would allow taxpayers to pay owed taxes through installment plans or settlement agreements.
These planned changes represent a departure from the existing approach, which can often extend over a year to finalize, according to Forbes. Currently, the IRS’s voluntary disclosure program targets taxpayers whose deliberate tax violations may result in criminal charges, rather than those who have made inadvertent reporting mistakes.
Separately, lawmakers are discussing a dedicated voluntary disclosure program aimed at cryptocurrency taxpayers, including those who made unintentional errors on their filings. Section 502 of the proposed Digital Asset Tax Certainty Act would provide a framework to address past violations with specific penalties, contrasting with the current IRS program’s focus on intentional tax fraud. This bill received approval from the House Ways and Means Committee in September.
This overhaul reflects the IRS’s effort to make tax compliance smoother and less punitive, especially for cryptocurrency holders, aiming to resolve cases faster and reduce the burden of penalties. The legislative move to establish a separate crypto-focused disclosure path indicates growing recognition of the unique challenges posed by digital assets.
Why it matters
These updates signal a strategic shift in how the IRS handles tax compliance, particularly regarding cryptocurrencies, making it easier for taxpayers to correct mistakes and reducing the risk of harsh penalties, while ongoing legislative efforts seek to further tailor disclosure programs to the needs of crypto users.
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