IRS plans lower penalties and 120-day tax disclosures

The Internal Revenue Service is preparing to overhaul its voluntary disclosure program before December, with lower penalties and a goal of resolving cases within 120 days after a completed submission, including cases that involve cryptocurrency. IRS Criminal Investigation Chief Jarod Koopman described the plans at the UCLA Extension Tax Controversy Conference. Forbes reported the remarks on October 23, and Cointelegraph and other outlets published accounts the same day.

What happened

According to the Forbes report, as summarized by Cointelegraph, Koopman said the agency aims to introduce the revised program before December. The 120-day target would run from the point a taxpayer completes the required submission, not from the day a case is first opened. Forbes described that as a shorter path than the current practice, which can take a year or longer.

Koopman said penalties under the revised program would be "substantially lower" than those imposed now, but he did not give numbers. The agency is also considering installment plans and offers in compromise, so outstanding tax might be settled without a single lump-sum payment, Cointelegraph reported.

Cryptocurrency would not get its own disclosure lane. Koopman told the conference that digital-asset cases would use the same voluntary disclosure procedures as other forms of tax noncompliance. TokenPost, covering the same remarks, said the change would revise the existing program rather than create a crypto-only process.

That program is narrow. It is meant for taxpayers whose willful failure to comply could expose them to criminal prosecution. It is not designed for people correcting unintentional reporting errors, according to both Cointelegraph and TokenPost.

The October comments continue a line Koopman has already drawn in public. On August 25 he said the IRS was close to finalizing a new voluntary disclosure program, expected then within about 60 days, with faster processing, lower penalties, and digital assets placed inside the general practice, according to a September account by the tax controversy firm Hochman Salkin Toscher Perez.

Why it matters

Voluntary disclosure is a trade. A person who comes forward before the IRS has the case, files accurate returns, and pays tax, interest, and penalties can sharply reduce the chance of a criminal referral. The cost of that trade has been time and a heavy civil penalty. A 120-day target and lower penalties would change those terms, but only after the agency publishes them.

The outline is not a general forgiveness program for every missed crypto form. Reports on the Forbes piece stressed the willful-conduct setting. An unintentional omission is not the same process as a case with possible criminal exposure. Reading the two as interchangeable would go beyond what Koopman described.

The decision against a crypto-specific IRS track also matters. Digital-asset cases would be measured against the general rules, not a separate amnesty. That may be simpler to run, but it also means there is no published crypto penalty schedule yet. Conference remarks are not a completed offer.

What's next

Nothing in the public remarks is a finished rule. Penalty rates have not been released. Installment plans and offers in compromise were described as options under consideration, not as features already in force. Until the IRS issues the revised program, the current voluntary disclosure practice is the one on the books.

Congress is on a separate track. Section 502 of the proposed Digital Asset Tax Certainty Act would direct Treasury to create a digital-asset disclosure program with defined penalties, including a route for violations that were not willful. The House Ways and Means Committee approved the bill in September, Cointelegraph reported. It has not become law. That proposal is distinct from the IRS revision of the existing practice.

The open questions are timing and text. Through its Criminal Investigation chief, the agency has said it wants the revised program out before December. Whether that date holds, and what the penalty percentages will be, depends on the guidance the IRS actually releases.

Sources

• Forbes: Confession May Soon Cost Less: IRS Promises Lower Penalties For Voluntary Disclosure
• Cointelegraph: IRS plans lower tax disclosure penalties, including for crypto
• TokenPost: IRS Plans Faster Tax Disclosures With Lower Penalties for Crypto Cases
• Taxlitigator: A New IRS Voluntary Disclosure Program Is Coming—and Crypto Will Be Part of It