Forbes: IRS plans faster Voluntary Disclosure Practice with lower penalties

According to Forbes, the Internal Revenue Service is working on changes to its Voluntary Disclosure Practice (VDP). This practice is intended for people who knowingly failed to meet their US tax obligations and may therefore face criminal exposure. The IRS reportedly wants to make the process faster and reduce penalties. Knowingly unreported crypto income or gains may also fall within the general VDP. The new rules are not yet final.

What does the IRS intend to change?

Forbes reported on 23 October 2026 on remarks by Jarod Koopman of IRS Criminal Investigation.

According to the report, the IRS is working on:

• lower penalties than under the current VDP;
• a target of resolving a case within no more than 120 days after the taxpayer has submitted all required information;
• possible payment arrangements for people who cannot pay the full amount immediately.

Koopman did not give final penalty rates, conditions or an effective date. The IRS has not yet published the new rules. These are reported plans, not rules that currently apply.

Who is the Voluntary Disclosure Practice for?

VDP is intended for taxpayers who may face criminal exposure because of willful noncompliance. In plain language, this means that someone knew about a US tax or reporting obligation but deliberately failed to meet it.

A simple example is a person who knew that crypto gains had to be included in a US tax return but deliberately left them out. Whether VDP is appropriate always depends on all the facts.

Participants must make a timely, truthful and complete disclosure and cooperate with the IRS. Participation does not provide automatic immunity. A qualifying voluntary disclosure may result in prosecution not being recommended, but every case is considered individually.

Where do unreported crypto transactions fit?

The reported revision would not create a separate VDP route for digital assets. Knowingly unreported crypto income or gains may instead fall within the general practice.

US taxpayers must include taxable digital-asset transactions in their US tax returns. Depending on the facts, this may include a sale or exchange at a gain, or receiving crypto as income.

The IRS also receives increasing amounts of information about certain crypto transactions through Form 1099-DA. Gross-proceeds reporting applies to certain broker transactions from 1 January 2025. For certain transactions, basis information is also reported from 1 January 2026. Receiving this form does not by itself determine whether tax is due, but it provides information that the IRS can compare with a tax return.

Americans Overseas also provides background information about crypto and the IRS. Whether a particular transaction is taxable or reportable depends on its facts.

What if the failure was not intentional?

Not every missing return or unreported crypto transaction is willful. Someone may not have known that US citizenship can create filing obligations even while living outside the United States. A transaction may also have been omitted because of a mistake or a genuine misunderstanding.

The IRS may describe this as non-willful conduct. This means that the noncompliance resulted from negligence, inadvertence, mistake or a good-faith misunderstanding of the law, rather than a deliberate decision to ignore the rules.

For some Americans living outside the United States, the Streamlined Foreign Offshore Procedures may be relevant. This is a different route with different conditions. Living abroad or being unaware of the rules does not by itself establish eligibility. The facts should be reviewed before overdue returns are filed.

What does this mean for Americans living in Europe?

For Americans living in Europe, existing US tax filing and reporting obligations do not change for now. US tax obligations can apply to US citizens living outside the United States. This can also affect people who hold both a European and US nationality, even if they have lived in Europe for most or all of their lives.

A person who meets the applicable US tax return filing requirements must generally include worldwide income in the return. This does not automatically mean that US tax will be due. Foreign tax credits, exclusions and tax treaties may affect the final calculation.

Income and taxable crypto transactions may also need to be included in a US tax return. Separate information-reporting obligations may apply to certain financial accounts and assets outside the United States. Filing a tax return, reporting information and actually paying tax are different obligations.

If earlier returns are missing or incorrect, the reason matters. A person who deliberately ignored an obligation is in a different position from someone who reasonably did not know that a US obligation existed. That distinction may determine which compliance route should be considered.

Is Congress creating a separate crypto programme?

Congress is separately considering the Digital Asset Tax Certainty Act, H.R. 10357. The bill would direct the Treasury Secretary to establish a digital-asset voluntary disclosure programme. The House Ways and Means Committee ordered the amended bill favorably reported on 16 September 2026.

The bill is not law. No new disclosure procedure is currently available under it.

When will the rules change?

Nothing changes for now. According to Forbes, the IRS aims to publish the revised VDP before December 2026, but this is a target rather than an established effective date.

The official proposal of 22 December 2025 stated that new terms could take effect six months after final publication. Until the IRS publishes final terms and an effective date, the current procedures remain in place.

What can you do now?

If you have missing returns, international information forms or unreported crypto transactions, do not file old returns without first reviewing the situation. Start by identifying which obligations may not have been met and why.

The distinction between willful and non-willful conduct can be decisive when identifying the appropriate procedure. Because this assessment depends on the individual facts, specific advice may be needed before contacting the IRS or filing overdue returns.

Americans Overseas continues to monitor developments at the IRS and provides information about changes relevant to US citizens living outside the United States.

Get Informed with Americans Overseas

We, the founders of Americans Overseas, were born in the Netherlands and received our American citizenship through our (American) mother.

When we first learned about the U.S.–Netherlands tax treaty around 2013, we felt disbelief (“this can’t be true”), anger (“how can they do this?”), fear (“will I get fined or have problems?”), and panic (“what should I do?”).

Unfortunately, it is true that there is a U.S. tax obligation for Dutch citizens who acquired American nationality by birth. There was no information from local authorities, the U.S. consulate referred us to the IRS, and the IRS itself was impenetrable.

That is why we started this initiative: to help others with reliable information, to prevent unnecessary panic, and to offer free, no‑obligation assistance. When needed, we can connect you with a network of affordable professionals (accountants) who can help you meet your U.S. tax obligations.

Contact us for more information

Sources

• IRS: Voluntary Disclosure Practice
• IRS: proposed revisions, 22 December 2025
• IRS: Streamlined Filing Compliance Procedures
• IRS: Digital assets
• GovInfo: H.R. 10357
• House Ways and Means Committee: committee action
• Forbes: report on Jarod Koopman’s remarks