US Legislation Proposes Voluntary Disclosure Program for Crypto Tax Errors
New bill offers crypto investors a pathway to correct past reporting mistakes with reduced penalties.
1Legislative Path to Compliance
The proposed Digital Asset Tax Certainty Act, specifically H.R. 10357, aims to establish a voluntary disclosure program for cryptocurrency investors. Approved by the House Ways and Means Committee with a 38-5 vote on September 16, the bill requires the Treasury secretary to implement this framework within 12 months of enactment.
2Addressing Historical Reporting Gaps
While new 1099-DA broker reporting rules provide the IRS with better visibility into current transactions, they do not resolve past discrepancies. Many investors failed to report trades correctly in previous years due to misunderstandings regarding tax treatment, leaving them without a predictable mechanism to rectify their historical tax liabilities today.
3Limitations of Existing Frameworks
Current IRS Voluntary Disclosure Practices primarily target taxpayers who willfully violated tax rules and face potential criminal exposure. For ordinary investors who made honest mistakes, existing procedures lack the standardized, predictable penalty structures necessary for resolution. This creates significant uncertainty for those attempting to correct their past tax reporting errors.
4Proposed Penalty Structure Tiers
Section 502 outlines two distinct penalty tracks based on taxpayer certification. Those certifying their violations were non-willful face a 0% penalty on the first $25,000 of tax deficiency per year, with 5% on amounts exceeding that. Non-certifying taxpayers face significantly higher rates of 25% and 40% respectively, depending on their filing timing.
5Operational Requirements for Taxpayers
Taxpayers seeking relief must generally file amended returns within 24 months of the program's establishment. The legislation provides protection from specific civil penalties and criminal referrals for those who properly disclose offenses. However, the program requires taxpayers to certify under penalty of perjury that their past violations were not fraudulent.
6Common Investor Reporting Errors
Industry experts note that reporting errors are widespread among retail crypto users. Common mistakes include the belief that tax is only due upon cashing out, reliance on incomplete exchange records, or incorrect classification of crypto-to-crypto trades. These systemic issues highlight the necessity for a clear, standardized resolution process for non-willful participants.
7Professional Guidance and Verification
Before participating, experts advise investors to thoroughly audit their transaction histories across all exchanges and wallets to identify specific years requiring correction. Given the legal implications of certifying under penalty of perjury, seeking professional guidance is recommended to ensure that mistakes are genuinely non-willful and correctly documented for the IRS.
8Broad Impact on Market Participants
The legislation addresses a significant knowledge gap, as a 2026 report by CoinTracker and Coinbase indicated only 49% of users understood that selling crypto constitutes a taxable event. By providing a defined correction period, this bill could offer much-needed certainty to a large segment of the US crypto investor population.