A significant overhaul of the IRS’s (Internal Revenue Service) voluntary disclosure program is in the works, a recent report by Forbes has revealed. The changes would reduce penalties for taxpayers and speed up how quickly cases get resolved, with crypto-related violations included in the mix.
Jarod Koopman, who leads IRS Criminal Investigation, said the agency hopes to roll out the updated program before December. He set a goal of wrapping up cases within 120 days once taxpayers finish the required submission steps, a notable shortening from current timelines. The media outlet reported that the existing process can stretch past a year before reaching resolution.
Despite the overhaul touching crypto cases, the IRS does not plan to build a separate track specifically for digital assets. Koopman told attendees at the UCLA Extension Tax Controversy Conference that the agency intends to process crypto-related issues through the same voluntary disclosure procedures already used for other types of tax noncompliance. This reflects that unreported Bitcoin gains, exchange transactions, staking income and similar digital-asset activity would all fall under the general framework rather than getting their own dedicated pathway.
Meanwhile, on the penalty side, Koopman indicated the revised program would bring substantially lower penalties than what taxpayers currently face, though he stopped short of naming specific figures. The agency is also weighing new flexibility for taxpayers to settle what they owe, potentially through installment payment plans or offers in compromise.
The voluntary disclosure program itself is built around a basic trade. Taxpayers who enter the process are required to provide a truthful, complete accounting of their situation and cooperate with the IRS as it works out the amount owed. In return, participation can lower the risk of criminal prosecution, though the IRS is clear that joining the program does not guarantee immunity.
The crypto fund structure itself adds another layer of complexity to how these taxes work. Most spot crypto funds are organized as grantor trusts. In order to preserve that pass-through status, a trust must also qualify as an investment trust, and Treasury regulations strip that status from any trust whose agreement gives it power to vary the certificate holders’ investments, a restriction with roots in a 1941 appeals court ruling.
