IRS Plans to Reform Voluntary Disclosure Program, Reduce Tax Penalties and Accelerate Processing

The U.S. Internal Revenue Service (IRS) is preparing to reform its voluntary disclosure program, planning to reduce penalties and accelerate the processing of tax violation cases, with coverage extending to cases involving cryptocurrency, according to a Friday report from Forbes. Jarod Koopman, head of IRS Criminal Investigation, said the agency aims to roll out the revised program by December and close cases within 120 days after taxpayers complete the required submission process. He stated that the new framework will not establish a separate disclosure channel for digital assets, but will apply the same voluntary disclosure procedures used for other forms of tax noncompliance. Koopman also said penalties under the revised program will be significantly lower than current levels, though no specific amounts were provided, and the IRS is considering allowing taxpayers to settle outstanding liabilities through installment payments or offer-in-compromise. According to Forbes, the current process often takes a year or longer to complete and primarily targets taxpayers who willfully violated tax laws and may face criminal prosecution, rather than those who made filing errors due to negligence. Meanwhile, a separate voluntary disclosure initiative for crypto taxpayers is advancing at the legislative level. Section 502 of the Digital Asset Tax Certainty Act would establish a correction process with clearly defined penalty standards for past violations; the bill passed the House Ways and Means Committee in September.