IRS voluntary program would cut penalties for unreported crypto taxes

What does this do?

HR 9174 would create a voluntary IRS program allowing people to file corrected tax returns for unreported digital asset income from prior years. Participants would pay the taxes owed plus interest and a reduced penalty. The IRS would have one year to set up the program, and participants would have two years after that to file corrected returns.

Who does it affect?

The bill affects people who own or have traded digital assets such as Bitcoin, Ethereum, or NFTs and did not properly report those transactions on federal taxes. That includes everyday investors, traders, and anyone who received digital assets as payment without reporting it.

Why does it matter?

People who come forward receive protection from criminal prosecution for the tax violations they disclose, as long as they are not already under criminal investigation. Those already under criminal investigation are excluded unless the IRS grants a special waiver.

What does it cost, and who pays?

• Honest-mistake penalty: 0–5% of extra tax
• Intentional or uncertain: 25–40% of unpaid tax
• Both rates below standard IRS penalties