IRS Reforms Voluntary Disclosure Program, Reduces Penalties and Speeds Up Processing

The Internal Revenue Service (IRS) is preparing to reform its voluntary disclosure program, planning to reduce penalties and expedite the processing of tax violation cases, including those involving cryptocurrency. Jarod Koopman, head of the IRS Criminal Investigation Division, stated that the agency aims to launch the revised program by December and to close cases within 120 days after taxpayers complete the required submission process. The new plan will not establish a separate disclosure channel for digital assets but will apply the same voluntary disclosure procedures to other forms of tax noncompliance. The penalties under the revised program will be significantly lower than current levels, although specific amounts have not been provided. The IRS is considering allowing taxpayers to settle debts through installment payments or offers in compromise. The current program often takes a year or longer to complete and primarily targets taxpayers who intentionally fail to comply with tax laws, rather than those who make errors due to negligence. Meanwhile, legislative efforts are advancing another voluntary disclosure proposal aimed at cryptocurrency taxpayers. Section 502 of the Digital Asset Taxation Certainty Act will establish a correction process with clear penalty standards for past violations, which passed the House Ways and Means Committee in September.

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