The IRS is preparing to streamline its Voluntary Disclosure Program with lower penalties and faster resolution timelines, making it more feasible for taxpayers with unreported crypto gains to come forward.
IRS Criminal Investigation Chief Jarod Koopman announced the revamped program at the UCLA Extension Tax Controversy Conference, setting a target of resolving voluntary disclosure cases within 120 days of submission. This represents a significant reduction from current timelines, which often exceed one year.
Key Program Changes
The revised Voluntary Disclosure Program will introduce lower penalties across the board and more flexible payment options, including installment plans and offers in compromise. These changes address a primary barrier to participation: taxpayers unable to pay lump-sum amounts will have additional pathways to resolve their tax obligations.
Crypto transactions will be processed under the general VDP framework rather than through a separate track, meaning digital asset holders will access the same streamlined process and reduced penalties available to other taxpayers disclosing unreported income.
External Pressures Driving Change
The timing reflects broader regulatory developments. The IRS introduced Form 1099-DA reporting requirements for 2025, requiring custodial platforms to report digital asset sales directly to the agency. Additionally, Section 502 of the Digital Asset Tax Certainty Act, which passed the House Ways and Means Committee, proposes a distinct disclosure option for digital asset violations with penalties as low as 0% on the first $25,000 of tax deficiency under certain conditions.
Implications for Compliance
The faster resolution timeline addresses a critical deterrent in the current system: extended cases create ongoing compliance costs, legal fees, and uncertainty. By compressing the process to 120 days, the IRS removes friction from the disclosure process for individuals with prior unreported gains from trading, staking, mining, or other digital asset activities.
The combination of the revised VDP, proposed legislative provisions, and new reporting requirements represents the most coordinated federal effort to date to align crypto tax compliance with how other asset classes are treated.
