IRS Plans to Cut Crypto Tax Disclosure Penalties and Speed Resolutions to 120 Days

The IRS is preparing to overhaul its Voluntary Disclosure Program before December, introducing lower penalties and a target of resolving completed tax disclosure submissions within 120 days rather than the current timeline that can stretch well beyond a year. IRS Criminal Investigation Chief Jarod Koopman announced the planned changes at the UCLA Extension Tax Controversy Conference, confirming that unreported digital asset income from trading, staking, or mining will fall under the general disclosure framework alongside flexible payment options like installment plans and offers in compromise.

The revamped program arrives alongside the 2025 Form 1099-DA reporting regime, which requires custodial platforms to report digital asset sales directly to the agency, increasing compliance pressure on taxpayers with willful past reporting failures and potential criminal exposure. On a parallel legislative track, the House Ways and Means Committee passed Section 502 of the proposed Digital Asset Tax Certainty Act, which would create a separate crypto disclosure option with penalties as low as 0% on the first $25,000 of tax deficiency for eligible filers who meet specific conditions.