A revamped voluntary disclosure program could resolve cases within 120 days and offer lower penalties for crypto holders who come clean on past tax violations.
The IRS is preparing to make it significantly easier for taxpayers, including crypto holders, to admit past tax mistakes without facing the kind of penalties that have historically made voluntary disclosure feel like a financial punishment. The agency’s overhaul of its Voluntary Disclosure Program is expected to land before December, and the changes are substantial enough to matter for anyone sitting on unreported digital asset gains.
IRS Criminal Investigation Chief Jarod Koopman announced the revamped program at the UCLA Extension Tax Controversy Conference, outlining a target of resolving voluntary disclosure cases within 120 days of a completed submission. That is a meaningful compression of the current timeline, which can stretch well beyond a year.
The revised Voluntary Disclosure Program will feature lower penalties across the board and introduce more flexible payment structures, including installment plans and offers in compromise. For taxpayers who owe back taxes but cannot cover a lump sum, that flexibility is the difference between participation and avoidance.
Crypto transactions will fall under the general VDP framework rather than a separate dedicated track. That means the same streamlined process, shorter timelines, and reduced penalties available to other taxpayers will apply to those disclosing unreported digital asset income.
The pressure to act is not abstract. The IRS rolled out new Form 1099-DA reporting requirements for 2025, which requires custodial platforms to report digital asset sales directly to the agency.
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Congress is also moving on a parallel track. Section 502 of the Digital Asset Tax Certainty Act passed the House Ways and Means Committee and proposes a distinct disclosure option for digital asset violations. Under that proposal, eligible filers could face penalties as low as 0% on the first $25,000 of tax deficiency, provided certain conditions are met.
The current voluntary disclosure process has a reputation for being slow, punishing, and uncertain enough that many tax attorneys advise clients to weigh their options carefully before stepping forward. Cases that drag past a year create their own compliance costs, legal fees, and uncertainty. Cutting that to 120 days removes one of the primary deterrents.
The willfulness question matters here too. Voluntary disclosure programs are specifically designed for taxpayers who may have willfully failed to report income and who face potential criminal exposure as a result. A faster, cheaper voluntary disclosure process lowers the cost of resolving that exposure before it becomes a criminal investigation rather than a civil tax dispute.
For individual holders, the most practical implication is timeline. The program is expected before December, and the 120-day resolution target would give taxpayers a reasonably defined process to plan around. Anyone with exposure to prior unreported gains, whether from trading, staking, mining, or other digital asset activity, has a cleaner path forward than they have had before.
The combination of the revised VDP, the proposed Digital Asset Tax Certainty Act provisions, and the new 1099-DA reporting regime represents the most coordinated federal effort yet to bring crypto tax compliance into line with how other asset classes are treated.