IRS Voluntary Disclosure Program for Crypto (2026)
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Worried that years of unreported crypto could turn into a criminal problem, not just a tax bill? You are right to take it seriously, and you still have options.
I'm Chris Herbst, Founder and Director at CountDeFi, a crypto tax firm that specializes in complex reporting and IRS audits. I hold the GTP (Global Tax Practitioner) designation and am a member of CIBA (Chartered Institute for Business Accountants), and since 2017 our team has helped US investors clean up everything from a single missed year to a decade of unfiled activity across dead exchanges.
I've written this guide for US taxpayers who under-reported or never reported their crypto, whether that is 1 forgotten Coinbase account, several years of DeFi across multiple wallets, or offshore exchange balances that were never disclosed. I'll explain what the IRS Voluntary Disclosure Program is, who should use it instead of the streamlined route, how the process works, and why 1099-DA has made the decision urgent.
What Is The IRS Voluntary Disclosure Program?
The IRS Voluntary Disclosure Program, run through IRS Criminal Investigation, is the formal way for a taxpayer who willfully broke the rules to come forward before the IRS finds them. In plain terms, it is for people who knew they should have reported crypto and chose not to. In exchange for a disclosure that is timely, truthful, and complete, plus full payment, Criminal Investigation generally will not recommend the case for criminal prosecution.
That last point is the whole reason the program exists. It does not erase the tax or the penalties. It reduces the risk of the worst outcome, a criminal charge, for people whose conduct was serious enough to carry that risk.
It is not the right tool for everyone. Most investors who got the reporting wrong have a cheaper, lower-stakes path. Here is how the main routes compare at a glance:
When Does The Door Close?
Voluntary disclosure only works while it is genuinely voluntary, and the timeliness rules are stricter than most people expect.
A disclosure stops being timely once any of 4 things has happened. The IRS has started a civil examination or criminal investigation of you, or told you it intends to. The IRS has received information from a third party that alerts it to your specific non-compliance. The IRS has opened an examination directly related to your liability. Or the IRS has picked up information about you through a criminal enforcement action.
The third-party prong is the one crypto investors misjudge, in both directions. A broker filing a routine Form 1099-DA is not the same thing as the IRS being alerted to your non-compliance, so a 1099-DA landing in the system does not by itself end your eligibility. A John Doe summons is a different matter entirely. The IRS has used those against Coinbase, Kraken, Circle, and Poloniex to obtain user records, and a summons naming an exchange you traded on is exactly the kind of third-party information that closes the door. Informants and other government agencies count too.
So the practical rule is not "act before any data reaches the IRS." It is "act before the IRS has been pointed at you," and you rarely find out that has happened until it is too late. If you have received a crypto notice or 6174 letter, the question is already settled.
Who Should Use Voluntary Disclosure Vs Streamlined Filing?
The entire decision turns on 1 word: willfulness. It is a legal question, not an accounting one, and getting it wrong in either direction is expensive.
What Does Willful Mean To The IRS?
Willful means you knew about the obligation and intentionally did not meet it. Non-willful covers negligence, a genuine misunderstanding, or good-faith mistakes. The IRS looks at facts and circumstances, not your say-so, so the line is rarely as clean as people hope. Signs that push toward willful include:
- moving funds to offshore or privacy-focused platforms to stay hidden
- answering "No" to the digital asset question on Form 1040 while actively trading
- keeping a second set of records, or destroying records
- reporting some accounts while deliberately omitting others
Voluntary Disclosure Program (Willful)
If your conduct was willful, the Voluntary Disclosure Program is the route that carries protection from criminal prosecution. It is more involved and more expensive than the streamlined path, but for someone with real criminal exposure it is the principal route for reducing that risk.
Streamlined Filing Compliance Procedures (Non-Willful)
If you were genuinely non-willful, the Streamlined Filing Compliance Procedures are far gentler. You certify non-willful conduct under penalty of perjury, file the amended and delinquent returns, and pay a reduced penalty:
- 5% miscellaneous offshore penalty for the domestic version (SDOP)
- 0% penalty for eligible taxpayers who live abroad (SFOP)
One caution worth stating plainly. The streamlined program is open as of 2026, but the IRS may modify or discontinue it in the future, and when it tightens the willful program it has tended to narrow the non-willful one next. Eligibility today is not a guarantee of eligibility tomorrow.
Here is the side-by-side that clients ask for most:
The right column is materially cheaper, which is exactly why the willful-versus-non-willful call has to be made carefully, and usually with a crypto tax expert by your side.
Guessing which route you qualify for is the expensive way to find out.
Book a Free CallHow Does The IRS Voluntary Disclosure Program Work?
The program follows a defined sequence through IRS Criminal Investigation. It is not a form you mail in and forget.
What Is Form 14457?
Form 14457, the Voluntary Disclosure Practice Preclearance Request and Application, is the entry point, and it runs in 2 stages:
- Part 1 is a preclearance request. Criminal Investigation checks whether you are eligible, meaning they have not already opened an inquiry into you.
- Part 2 is the full application. You identify every year of non-compliance and give a complete, honest narrative of the willful conduct.
The IRS updated Form 14457 in 2022 to add a dedicated virtual currency section, so digital assets are now an explicit part of the disclosure rather than an afterthought. At CountDeFi we see this section trip people up constantly, because it demands a coherent transaction history that most applicants do not have on hand.
What Penalties Apply Under Voluntary Disclosure?
Under current practice, a voluntary disclosure involves:
- a 6-year disclosure period of amended or delinquent returns
- payment of all tax and interest due across those years
- a 75% civil fraud penalty applied to the single year with the highest tax liability
The funds also have to come from a legal source. The program is for tax non-compliance, not for laundering proceeds of other crimes.
What Are The 2026 Proposed Changes?
This is the part that is moving right now, so treat it as pending rather than settled. In late 2025 the IRS proposed a reform to the Voluntary Disclosure Practice. The headline change would replace the 75% civil fraud penalty with a 20% accuracy-related penalty on the amended returns for each year in the 6-year period. The public comment window closed on March 22, 2026, and no final guidance has been issued. Anyone disclosing today should plan around the current rules while watching the proposal closely. This is precisely the kind of shifting detail where a specialist earns their fee.
Why Does 1099-DA Make Voluntary Disclosure Urgent Now?
For years, the gap in IRS crypto enforcement was data. That gap is closing fast. Starting with the 2025 tax year, US exchanges and brokers report your activity directly to the IRS on Form 1099-DA, which means the agency now receives a stream of third-party records it never had before.
The problem is timing. Voluntary disclosure stays available only while the IRS has not yet been pointed at your non-compliance. If third-party reporting leads the IRS to identify a discrepancy, and it acts on it, you may find you are no longer eligible. I've written before on how the IRS tracks cryptocurrency and on what Form 1099-DA reports, and the short version is this: the window to come forward voluntarily is narrowing, not widening.
You should also understand:
- how to avoid an IRS crypto audit in the first place
- what to do if you are already behind on crypto taxes
- how to rebuild records when an exchange has shut down
How Do Foreign Exchange Balances Affect A Disclosure?
Offshore balances make a disclosure harder, because the disclosure rides on FBAR history as well as your returns. That is why cases involving Binance, KuCoin, Bybit, or other non-US platforms take longer to build than domestic ones.
The reporting position itself is unsettled. FinCEN has not yet finalized regulations extending FBAR reporting to accounts holding only virtual currency, though an account holding crypto alongside fiat currency can already be reportable, and FATCA reporting on Form 8938 runs on a separate track. I've set out the full picture in the CountDeFi guide to FBAR reporting for crypto. For a disclosure, the practical point is narrower: you need the balance history reconstructed before you can file anything, and material offshore balances are worth running past a specialist rather than guessing.
What Happens If You Do Nothing?
Doing nothing feels like the low-effort option. It is the highest-risk one. If the IRS reaches you before you reach them, you lose access to voluntary disclosure entirely, and willful failure to report can escalate from civil penalties to criminal referral. Interest and penalties also compound every year the exposure sits untouched.
Our team has worked with enough of these cases since 2017 to know the pattern. The investors who come forward on their own terms keep control of the outcome. The ones who wait for the letter are negotiating from the back foot.
CountDeFi Is Your Voluntary Disclosure Solution
Every voluntary disclosure stands or falls on 1 thing: the quality of the records behind it. You cannot file a complete, truthful, 6-year history if the underlying transaction data is fragmented across wallets, exchanges, and platforms that no longer exist. This is the exact problem CountDeFi was built to solve.
We are not just accountants, we are data scientists who reconstruct complex crypto histories with forensic accuracy, then produce the clean, defensible numbers a disclosure depends on. Because willfulness is a legal question, we work alongside your tax attorney, who owns the legal strategy and the privileged conversations, while our team handles the reconstruction, the calculations, and the reporting. Our Precision 7™ System turns that data chaos into a defensible, IRS-ready result, and our crypto tax accounting service is built for exactly this kind of multi-year reconstruction. 1 recent client came to us after 4 unreported years across 6 exchanges, 2 of them offshore and since defunct. Reconstructing that history, not arguing the law, was the hard part, and it is the part we do best.
Book A Free Call
Coming forward is the right move, but only if the numbers behind your disclosure hold up. CountDeFi rebuilds fragmented, multi-year crypto histories into the complete, defensible records a voluntary disclosure requires, and coordinates with your legal counsel so the accounting and the legal position line up. Start by booking a free 15-minute call with one of our IRS crypto specialists before the IRS makes the decision for you.
