IRS to introduce reduced penalties for voluntary tax disclosure, crypto included: Forbes

IRS to introduce reduced penalties for voluntary tax disclosure, crypto included: Forbes

The United States tax authority is working toward quicker case resolutions and enhanced payment flexibility for individuals who voluntarily come forward about previous tax compliance failures through a planned restructuring of its program.

According to a Friday report from Forbes, the United States Internal Revenue Service (IRS) is working to restructure its voluntary disclosure initiative, including plans to decrease penalty amounts and speed up the processing time for tax compliance violations, including matters related to cryptocurrencies.

According to Jarod Koopman, Chief of IRS Criminal Investigation, the agency has set a goal to launch the updated program prior to December, targeting a 120-day timeframe for case resolution following taxpayers' completion of the necessary submission requirements.

According to reports, the restructuring would not create a distinct disclosure pathway specifically for digital assets. During his remarks at the UCLA Extension Tax Controversy Conference, Koopman explained to conference participants that the IRS would process digital asset cases using the identical voluntary disclosure framework applied to other categories of tax noncompliance.

The representative from the IRS further noted that penalty amounts under the updated program would be significantly reduced compared to current enforcement levels, though specific numerical figures were not disclosed. The agency is exploring options to permit taxpayers to resolve outstanding tax obligations via installment payment arrangements or through offers in compromise.

According to Forbes, the suggested modifications would represent a departure from the current framework, which typically requires a year or more for completion. The IRS's voluntary disclosure program as it exists today is designed for taxpayers whose deliberate noncompliance with tax regulations could result in criminal prosecution, as opposed to individuals who committed inadvertent reporting mistakes.

In parallel developments, members of Congress are evaluating a distinct voluntary disclosure initiative specifically targeting cryptocurrency taxpayers, encompassing individuals who committed inadvertent reporting mistakes. The Digital Asset Tax Certainty Act's Section 502 would create a framework for rectifying previous compliance failures with clearly specified penalties, in contrast to the IRS's current program, which chiefly targets willful tax noncompliance. The legislation successfully passed through the House Ways and Means Committee in September.