IRS Plans 120-Day Case Resolution in Overhauled Crypto Tax Disclosure Program

120-Day Resolution Target

The Internal Revenue Service is preparing an overhaul of its voluntary disclosure program that would cut penalties and shorten case timelines, with violations tied to digital assets falling under the same framework. Jarod Koopman, who heads Criminal Investigation at the IRS, presented the plan at the UCLA Extension Tax Controversy Conference on Friday, saying the revised program should be in place before December. Once a taxpayer completes the required submission steps, the agency aims to close the case within 120 days. The current program routinely takes a year or longer from filing to resolution, a lag the agency treats as a barrier for taxpayers deciding whether to come forward.

Voluntary disclosure is the channel for taxpayers whose conduct could expose them to criminal prosecution, chiefly willful breaches of tax law rather than innocent reporting mistakes. Criminal Investigation is the enforcement arm of the agency, and a completed disclosure has historically been the main route for a taxpayer to avoid criminal referral. The reworked structure will not create a separate procedure for digital assets: crypto-related violations would move through the same procedures applied to other forms of noncompliance. Koopman told attendees the penalties under the revised program would be substantially lower than those now imposed, though he did not put a figure on the reduction. The agency is also weighing payment flexibility for taxpayers who cannot settle in a single payment, including installment agreements and offers in compromise, the formal mechanism through which the IRS accepts less than the full balance owed. For crypto holders, the disclosure decision is often complicated by fragmented records: gains spread across wallets and exchanges, missing cost-basis data, and transactions routed through a crypto mixer that obscure the original source of funds. Koopman did not say how the 120-day clock applies to complex cases involving multiple years of filings.

Digital Asset Tax Certainty Act

Congress is running a parallel track aimed specifically at digital asset holders. The Digital Asset Tax Certainty Act would create, in Section 502, a voluntary correction procedure for past digital asset tax violations with defined penalty schedules, and the bill cleared the House Ways and Means Committee in September. Its scope differs from the IRS revamp in one decisive respect: the legislative proposal reaches taxpayers who made unintentional reporting errors, a group the agency's existing program does not serve. The current channel is built for willful noncompliance, where a taxpayer knew the rule and broke it anyway.

Non-willful errors are common in crypto because the underlying records are messy. A taxpayer may hold assets across several exchanges and self-custody wallets, earn staking income as a validator operator, or trade crypto futures whose settlement events create reportable gains the accounting software never captured. Information reporting helps where the platform files: exchanges that report to the IRS, Coinbase among them (see our guide on Coinbase & the IRS for what gets reported), still cannot reconstruct transfers between self-custody wallets. A market maker operating across venues generates thousands of reportable events a year, which is where disclosure math becomes most expensive. Losses realized during a bear market add another layer, since harvested losses must be matched against dispositions that were tracked inconsistently. Section 502 would give this population a fixed, published penalty schedule instead of a case-by-case outcome. Under the bill, correcting past violations would follow set penalty amounts rather than negotiated outcomes, giving filers certainty about the cost before they apply. The bill remains a proposal: it still needs passage by the full House and the Senate, and the IRS's own revamp has not yet been published in final form.

Penalties Not Yet Set

The distinction that matters for taxpayers is status: neither change is in effect. The IRS overhaul is an announced plan with a December target, and the agency has not published the penalty levels, the eligibility criteria or the submission requirements, so nobody can yet lock in the promised lower cost. Section 502 sits earlier still, at committee passage, and its defined penalties do not exist until both chambers pass the bill. What the two tracks share is direction. An executive channel built for willful violators and a legislative channel built for non-willful errors are both moving toward faster, cheaper correction of digital asset filings, and the December rollout gives taxpayers a concrete date to watch.