IRS to Launch Revamped Voluntary Disclosure Program by Late November, Crypto Not Carved Out
TREE NEWS reports: The U.S. Internal Revenue Service (IRS) plans to roll out a reformed Voluntary Disclosure Program (VDP) by the end of November, aiming to shorten the processing time for cases after taxpayers submit complete documentation, head of the IRS Criminal Investigation division. Koopman indicated that the new program will not create a separate procedure for cryptocurrency; crypto-related disclosures will be handled within the general framework.
Background and Context
The IRS has been increasing its focus on cryptocurrency tax compliance. In recent years, the agency has updated tax forms to include a question about virtual currency transactions and has issued guidance on how to report crypto income. The VDP allows taxpayers to come forward voluntarily to correct past tax errors and potentially avoid criminal prosecution. However, the existing program has been criticized for lengthy processing times and lack of clarity, especially for complex cases involving digital assets.
Implications for Crypto Taxpayers
The decision not to create a separate crypto disclosure process may be seen as a double-edged sword. On one hand, it simplifies the framework by integrating crypto into the existing VDP, which could make it easier for taxpayers to navigate. On the other hand, it may not address the unique challenges of cryptocurrency taxation, such as valuation, tracking cost basis, and cross-border transactions. Industry participants have called for more tailored guidance.
Koopman’s announcement suggests that the IRS is seeking to modernize its enforcement and taxpayer services simultaneously. By reducing processing times, the agency hopes to encourage more voluntary disclosures, which can be more efficient than pursuing criminal investigations. For crypto holders with unreported gains, the revamped VDP could provide a clearer path to compliance.
Forward-Looking Perspective
As the IRS prepares to launch the new VDP, taxpayers and advisors should stay alert for detailed guidelines expected in the coming weeks. The lack of a crypto-specific procedure may prompt further calls for legislative clarity on digital asset taxation. With the crypto market maturing and regulators worldwide tightening rules, voluntary disclosure may become an increasingly important tool for those who have fallen behind on their tax obligations. The IRS’s move reflects a broader trend of integrating crypto into traditional tax enforcement rather than treating it as a separate category.
