IRS Plans to Lower Penalties for Crypto Tax Disclosures

IRS targets faster tax resolutions

The US Internal Revenue Service (IRS) is planning to update its voluntary disclosure program. The new process aims to lower penalties for taxpayers who admit past tax violations. This change would also apply to taxes related to digital assets, such as cryptocurrencies.

Key points

• The IRS targets resolving cases within 120 days of a taxpayer's submission.
• Officials state penalties will be significantly lower than current levels, though specific amounts are not yet available.
• No separate process will be created for digital assets; they will use the standard tax procedures.
• The agency is considering installment plans or offers in compromise for settling debts.

What officials confirmed

Jarod Koopman, the head of IRS Criminal Investigation, confirmed the agency's goals at the UCLA Extension Tax Controversy Conference. He stated that the revised program should be introduced before December. Koopman clarified that the IRS will treat crypto assets the same way it handles other forms of tax noncompliance. This means a specific crypto-only disclosure pathway is not planned.

Other developments

Forbes reports that the proposed changes mark a shift from the current system, which often takes a year or longer to complete. The current program is primarily for cases of willful tax evasion. Meanwhile, US lawmakers are working on a separate bill, the Digital Asset Tax Certainty Act. Section 502 of this bill would create a specific process for correcting unintentional crypto tax errors. This bill cleared the House Ways and Means Committee in September.

Why this matters

For people who have not reported crypto income, these changes may make it easier and less costly to comply with the law. The focus on unintentional errors in the legislative proposal addresses a gap in the current IRS program, which targets deliberate noncompliance.

Sources

• Cointelegraph
• Forbes

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