IRS plans to cut tax disclosure penalties in crypto compliance overhaul

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IRS cuts crypto tax penalties

Highlights

IRS plans to revise its voluntary disclosure program, keeping digital assets in the same framework as other tax cases with substantially lower penalties.
Payment options like installment plans and offers in compromise are under consideration, aiming to expedite resolution compared to the current year-long process.
Section 502 of the Digital Asset Tax Certainty Act, passed by the House Ways and Means Committee in September, proposes defined penalties for digital asset reporting errors.

Planned revisions to disclosure process

As reported by Cointelegraph, citing Forbes, IRS Criminal Investigation Chief Jarod Koopman says the agency is working on a revised voluntary disclosure program that keeps digital assets within the same framework used for other tax noncompliance cases.

Koopman tells attendees at the UCLA Extension Tax Controversy Conference that the IRS does not plan to create a separate disclosure track for crypto. He also says penalties under the updated program would be substantially lower than current levels, though he does not give specific figures.

The IRS is also considering payment options that would let taxpayers settle outstanding liabilities through installment plans or offers in compromise. That would mark a notable change from the current process, which Forbes reports can take a year or longer to complete.

Crypto tax impact and legislative backdrop

The existing voluntary disclosure program is aimed at taxpayers whose willful failure to comply with tax laws could expose them to criminal prosecution, rather than people who made unintentional reporting errors. The planned IRS overhaul therefore appears focused on making that route faster and less punitive without carving out a separate crypto regime.

At the same time, lawmakers are considering a different disclosure framework for digital asset taxpayers. Section 502 of the proposed Digital Asset Tax Certainty Act would create a process for correcting past violations with defined penalties, including for taxpayers who made unintentional reporting mistakes, and the bill cleared the House Ways and Means Committee in September.

In our earlier coverage of Pakistan’s income tax filing deadline, we explained how tax experts and business groups urged the Federal Board of Revenue (FBR) to extend Tax Year 2026 submissions, arguing the final return form was notified too late to meet legal timelines. The article also highlighted ongoing IRIS portal glitches and unresolved extension applications, warning that taxpayers could face compliance risks and penalties due to system and procedural hurdles.

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