IRS plans lower penalties to settle unreported crypto taxes

The US Internal Revenue Service is preparing a cheaper and faster way for people to come clean about past tax violations, crypto included, according to a Forbes report summarised by Cointelegraph. The head of IRS Criminal Investigation, Jarod Koopman, outlined the plan at the UCLA Extension Tax Controversy Conference.

What is changing

• Timing: Koopman said the IRS aims to launch the revised voluntary disclosure program before December.
• Speed: the goal is to resolve cases within 120 days of a taxpayer completing the required submission. Forbes says the current process can take a year or longer.
• Cost: penalties would be "substantially" lower than today, though Koopman did not give numbers.
• Payment options: the agency is considering installment plans and offers in compromise for settling what is owed.

No special lane for crypto

Digital assets will not get their own track. Koopman said they will be handled through the same voluntary disclosure procedures used for any other kind of tax noncompliance. That matters because the program is designed for people whose willful failure to report could otherwise expose them to criminal prosecution. Someone who simply made an honest mistake on a crypto sale would normally fix it with an amended return instead.

A separate fix in Congress

Lawmakers are working on a different route. Section 502 of the proposed Digital Asset Tax Certainty Act would create a crypto-specific disclosure process with defined penalties, open also to taxpayers whose errors were unintentional. The bill cleared the House Ways and Means Committee in September but has not become law.

Why it matters

Crypto tax reporting is tightening worldwide: Australia has drafted rules for the OECD's crypto reporting framework, and South Korea has been debating when to start taxing gains. In the US, brokers now report digital-asset sales to the IRS, which makes old, unreported trades easier to spot. A cheaper disclosure option could pull more holders back into compliance before an audit finds them. As always, this is general information, not tax advice; talk to a qualified adviser about your own situation.