The IRS Is Updating Its Crypto Voluntary Disclosure Program: What Investors Must Know
Over the last few years, cryptocurrency has firmly transitioned from a niche interest into a mainstream asset class. Millions of taxpayers now hold Bitcoin, Ethereum, stablecoins, and various other digital assets. However, as the asset class has matured, tax reporting has grown substantially more complicated. Many investors entered the crypto market without realizing that digital asset transactions frequently create taxable events, while others intentionally opted out of reporting specific transactions.
Now, the IRS is clearly signaling that digital asset compliance remains one of its primary enforcement priorities.
The IRS is currently finalizing updates to its Voluntary Disclosure Program (VDP), with a specific focus on digital asset noncompliance. While these revised procedures are not yet final, they are expected to streamline the program and reflect the escalating importance of cryptocurrency enforcement.
For investors concerned about their prior tax reporting, this development demands attention. Fortunately, there is no need for unnecessary panic. Depending on the specific facts of your situation, there may still be valuable opportunities to voluntarily correct past reporting issues before the IRS initiates contact.
Increased IRS Visibility for Digital Assets
For years, numerous cryptocurrency transactions took place with relatively limited third-party reporting. That landscape is changing rapidly.
Congress and the IRS have consistently expanded reporting requirements for digital assets. Broker reporting via Form 1099-DA represents another major step toward comprehensive transparency. As more data flows directly to the IRS, matching taxpayer returns against reported cryptocurrency transactions becomes significantly easier.
This increased visibility does not mean every cryptocurrency owner will face an audit, nor does it mean that an honest reporting mistake guarantees a serious tax problem.
It does mean, however, that taxpayers with significant reporting issues must recognize the IRS is gathering more information than ever before.
Waiting and hoping the IRS simply overlooks a discrepancy is becoming a highly risky strategy.
Understanding the IRS Voluntary Disclosure Program
The IRS Voluntary Disclosure Program exists for taxpayers who wish to voluntarily disclose past tax noncompliance before the IRS identifies the issue on its own.
In basic terms, the program provides an avenue for taxpayers to come forward, report previously undisclosed tax issues, pay the owed tax, interest, and applicable penalties, and potentially avoid a recommendation for criminal prosecution.
One crucial point must be emphasized.
The program does not grant automatic immunity from criminal prosecution. The IRS guidance explicitly states that acceptance into the program does not guarantee criminal charges will be entirely off the table.
Nevertheless, voluntary disclosure has long served as an essential path for taxpayers with significant compliance concerns, as it demonstrates proactive cooperation before the government uncovers the issue independently.
The program is rooted in a practical reality. The IRS benefits when taxpayers voluntarily correct problems, saving the government the resources required to discover every instance of noncompliance through examinations or criminal investigations.
Why the VDP Isn't for Everyone
A common misconception about the Voluntary Disclosure Program is that it serves as a catch-all for anyone who made a mistake on their tax return.
That is simply not how the program operates.
The VDP is generally reserved for taxpayers whose prior noncompliance may have been willful. Under tax law, "willful" implies more than an honest mistake; it typically involves intentionally failing to comply with known tax obligations.
In contrast, many cryptocurrency reporting issues stem from situations such as:
Confusion surrounding complex reporting rules.
Incomplete transaction records.
Misunderstanding whether a specific transaction was a taxable event.
Errors in calculating capital gains or losses.
Reliance on inaccurate software or incomplete data from exchanges.
While these situations certainly require correction, they do not automatically dictate that a taxpayer belongs in the Voluntary Disclosure Program.
Selecting the wrong correction method can result in unnecessary costs and legal complications. That is why consulting with a professional is essential before taking action.
Proposed Changes to the VDP
The IRS initially proposed updates to the Voluntary Disclosure Program in late 2025, and those proposals are now advancing toward final implementation.
Although the exact final procedures have not yet been released, the proposed updates introduce several critical changes.
Among them are:
A standardized six-year disclosure period.
A uniform 20% accuracy-related penalty for amended returns.
Failure-to-file penalties for delinquent returns.
Mandatory electronic submission of Form 14457.
A three-month deadline following conditional acceptance to submit required returns and pay all tax, penalties, and interest.
The primary goal of these updates appears to be standardizing the process, making it easier to administer, and providing taxpayers with clearer expectations regarding timing and penalties.
Until final guidance is issued, taxpayers should remain aware that these procedures are subject to change.
The Importance of Timing
One of the defining features of any voluntary disclosure program is in its name.
The disclosure must truly be voluntary.
Once the IRS begins an examination, receives third-party information identifying your noncompliance, or otherwise initiates contact regarding the specific issue, certain disclosure avenues may close entirely.
Taxpayers who recognize they have significant reporting concerns should avoid waiting for an IRS notice to arrive in the mail before seeking professional advice.
Reviewing your situation promptly offers far more flexibility than attempting to formulate a response after the IRS has already opened an examination.
Differentiating Between Mistakes and Criminal Behavior
Another critical misconception is the belief that any cryptocurrency reporting error carries criminal consequences.
Fortunately, this is entirely false.
Tax law draws distinct lines between innocent mistakes, negligence, substantial understatements, civil fraud, and criminal tax violations. Each represents a vastly different situation governed by different legal standards.
Many taxpayers simply misunderstood the proper way to report digital assets. Others relied on incomplete transaction histories or flawed cost-basis data. Some were entirely unaware that trading one cryptocurrency for another could trigger a taxable gain.
These situations may still necessitate amended returns and additional tax payments, but they are fundamentally different from intentional tax evasion.
Because every case is dictated by its unique facts, taxpayers should avoid assuming they have nothing to worry about—or, conversely, that they automatically face criminal exposure.
Both extremes are often incorrect.
Common Questions About Expanding Crypto Reporting
As digital asset reporting requirements expand, we expect to see an influx of questions from taxpayers, such as:
Should I amend my prior-year returns?
What happens if I failed to report cryptocurrency several years ago?
What if I no longer have access to complete transaction records?
How do I report if my cryptocurrency exchange no longer exists?
Does every mistake require a formal voluntary disclosure?
Should I simply wait until the IRS contacts me?
The answer to nearly all of these questions is the same:
It depends.
Tax reporting decisions must be grounded in the taxpayer's complete factual background, including the nature of the transactions, the specific tax years involved, the amount of tax at issue, the available documentation, and whether the reporting failures were inadvertent or intentional.
There is almost never a one-size-fits-all solution.
Why You Shouldn't Rush to File Amended Returns
Upon discovering a reporting error, a taxpayer's natural reflex is often to immediately file amended returns.
Sometimes, this is exactly the correct approach.
Often, it is not.
If a taxpayer has potential criminal exposure, rushing to file amended returns without carefully evaluating all available correction options may lead to suboptimal outcomes.
Conversely, entering the Voluntary Disclosure Program for an honest, isolated mistake can subject a taxpayer to rigorous procedures that were never intended for their specific scenario.
The correct path forward depends on a thorough understanding of the facts before taking action.
The evaluation must always happen first.
The paperwork comes second.
Navigating Complex Crypto Taxation with Robertson Financial Group
Cryptocurrency taxation has developed into one of the most technically demanding areas of individual income tax reporting.
A single taxpayer's portfolio might involve transactions surrounding:
Multiple exchanges.
Self-custodied wallets.
Staking rewards.
Airdrops.
Hard forks.
NFTs.
Decentralized finance (DeFi) platforms.
International exchanges.
Thousands of distinct transactions.
Each of these elements raises specific reporting questions.
When historical reporting problems are layered on top of this complexity, determining the correct resolution typically requires far more than merely preparing an amended tax return.
Here in Tucker, Georgia, Michael Robertson and our team understand that resolving these issues requires a comprehensive evaluation of legal risks, available correction procedures, supporting documentation, and the long-term consequences of each path forward.
The Ongoing IRS Focus on Digital Assets
The proposed changes to the Voluntary Disclosure Program are part of a much broader trend, rather than an isolated administrative announcement.
Over the past several years, the IRS has methodically increased its focus on digital assets through:
Expanded reporting requirements.
New information return mandates.
Updated tax forms.
Additional compliance guidance.
Increased examination activity.
Enhanced public education campaigns regarding digital asset reporting.
The modernization of the VDP fits perfectly within this larger compliance framework.
For taxpayers who have accurately reported their cryptocurrency activity, these developments simply underscore the ongoing importance of meticulous recordkeeping.
For those with unresolved reporting issues, they serve as a clear reminder that proactive evaluation is always preferable before circumstances escalate.
Evaluating Your Options and Correcting Past Crypto Reporting
The IRS's planned revisions to its Voluntary Disclosure Program clearly demonstrate that digital asset compliance remains a top enforcement priority. While the final procedures are pending, the proposed changes are designed to streamline the disclosure process and establish standardized rules for taxpayers looking to rectify past noncompliance. The key takeaway is that not every crypto reporting mistake requires a voluntary disclosure; honest errors are handled very differently than willful noncompliance.
If you own cryptocurrency and have concerns about your prior-year reporting, now is an excellent time to review your situation. Contact Michael Robertson and the team at Robertson Financial Group. We can evaluate your tax filings, review your reporting history, and help you select the most appropriate and optimistic correction strategy before the IRS initiates contact.
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