IRS Prepares Major Overhaul of Voluntary Disclosure Program to Accelerate Case Resolution and Lower Penalties

Published Oct 23, 2026

The United States Internal Revenue Service is preparing a significant overhaul of its voluntary disclosure program, introducing targeted measures designed to secure faster resolutions and offer more flexible payment options for taxpayers looking to clear past tax violations. According to a recent report, the planned updates aim to streamline a historically cumbersome process while bringing greater clarity to complex compliance issues, including those involving digital assets and cryptocurrencies.

Jarod Koopman, the Chief of IRS Criminal Investigation, revealed details regarding the upcoming revisions during remarks at the UCLA Extension Tax Controversy Conference. Speaking to tax professionals and legal experts, Koopman outlined the agency’s ambition to roll out the revised program prior to December. A primary benchmark for the updated framework is a strict operational target: resolving qualifying cases within just 120 days of taxpayers successfully completing the required submission process.

The forthcoming changes represent a notable departure from the current bureaucratic landscape. Under existing administrative procedures, resolving a voluntary disclosure case can frequently drag on for a year or even longer, tying up resources for both the government and the taxpayer. By shrinking the timeline to a matter of months, the tax agency hopes to incentivize individuals and entities with historical compliance gaps to step forward voluntarily, thereby recovering revenue more efficiently without getting bogged down in protracted administrative delays.

Despite the mounting volume of cryptocurrency adoption and the unique regulatory hurdles associated with blockchain technology, the upcoming program overhaul will not establish a separate, standalone disclosure track exclusively for digital assets. Instead, Koopman clarified that the IRS intends to process digital asset infractions through the exact same voluntary disclosure procedures utilized for more traditional forms of tax noncompliance, such as foreign bank accounts, unreported offshore income, or traditional asset concealment.

This unified approach means taxpayers holding or trading cryptocurrencies must navigate the overarching framework just like any other noncompliant filer. The underlying message from the agency is that digital assets, while technologically distinct, remain subject to the same foundational tax principles and reporting obligations as fiat currency and traditional investments.

In addition to faster turnaround times, the revised voluntary disclosure framework is expected to feature substantially reduced penalties compared to those currently imposed under baseline enforcement rules. While Koopman did not disclose specific numerical figures or exact percentage reductions during his conference presentation, the prospect of lower financial repercussions could fundamentally alter the cost-benefit analysis for taxpayers debating whether to come clean.

Compounding this flexibility, the IRS is actively exploring provisions that would allow participants to settle their outstanding tax liabilities through structured installment plans or formal offers in compromise. Historically, individuals seeking to rectify severe noncompliance were often expected to possess the immediate liquidity required to cover massive retroactive tax bills, penalties, and interest all at once. By introducing viable payment pathways, the agency aims to lower the barrier to entry for taxpayers who want to resolve their issues but lack the immediate capital to pay off large lump sums in a single transaction.

To fully understand the significance of these administrative shifts, it is helpful to examine the intended scope of the IRS’s voluntary disclosure program. As it stands, the framework is specifically tailored for taxpayers whose willful failure to comply with federal tax laws exposes them to the grave risk of criminal prosecution. It is explicitly not designed for individuals who made simple, unintentional reporting errors, clerical mistakes, or minor miscalculations due to a misunderstanding of tax codes. For those minor infractions, standard amended returns or alternative administrative fixes are typically the appropriate remedy.

However, the intersection of taxation and digital assets has created a complex gray area, prompting legislative bodies to take notice alongside administrative agencies. While the IRS works from within to streamline its existing criminal investigation disclosure channels, lawmakers on Capitol Hill are simultaneously evaluating separate legislative efforts aimed specifically at crypto taxpayers.

A notable example is Section 502 of the proposed Digital Asset Tax Certainty Act, which cleared the House Ways and Means Committee in September. The proposed bill aims to establish a dedicated voluntary disclosure mechanism tailored to the unique realities of the crypto ecosystem. Importantly, this legislative initiative contemplates carving out a pathway for individuals who made honest, unintentional mistakes with their crypto taxes, providing them with a clear route to correction complete with well-defined penalties.

This legislative push contrasts sharply with the IRS’s administrative mandate, which remains heavily focused on willful noncompliance and criminal exposure. As discussions continue between lawmakers, regulators, and industry stakeholders, the broader tax landscape surrounding digital assets is clearly entering a phase of rapid evolution.

For now, taxpayers and tax professionals alike are awaiting the official rollout of the IRS’s revised voluntary disclosure program ahead of the targeted December timeframe. If the agency successfully delivers on its promises of a 120-day resolution window, reduced penalty structures, and flexible installment options, it could lead to a significant wave of voluntary compliance filings before the close of the year.