SKN | US Crypto Tax Bill Proposes Reduced Penalties for Investors Correcting Past Reporting Errors

Key Points:

• Section 502 of the proposed Digital Asset Tax Certainty Act would establish a voluntary disclosure program allowing eligible taxpayers to correct previous digital asset tax reporting violations by filing amended returns and paying outstanding taxes, interest and applicable penalties.
• Taxpayers who certify that their violations were neither fraudulent nor willful could qualify for reduced penalties, including 0% on the first $25,000 of annual tax deficiency and 5% on amounts above that during the program’s initial 12 months.
• The bill was approved by the House Ways and Means Committee in a 38-5 vote on September 16, 2026, but still requires approval by the full House and Senate and the president’s signature before becoming law.

US lawmakers are considering a crypto-specific tax disclosure program that could give investors a more predictable way to correct past reporting mistakes. The proposal comes as the Internal Revenue Service gains greater visibility into digital asset transactions, increasing the importance of accurate reporting while leaving some taxpayers uncertain about how to address errors from previous years.

Section 502 of the proposed Digital Asset Tax Certainty Act, H.R. 10357, would require the Treasury secretary to establish a Digital Asset Voluntary Disclosure Program within 12 months of the legislation becoming law. Eligible taxpayers would be able to amend previous returns, pay outstanding taxes and interest, and settle their liabilities under a defined penalty structure.

The House Ways and Means Committee approved the bill by a 38-5 vote on September 16. However, the proposal has not become law and must still pass the full House and Senate before it can be signed by the president.

New Reporting Rules Leave Earlier Errors Unresolved

The proposal comes as US crypto investors face the first tax filing season under the new Form 1099-DA broker reporting rules, which provide the IRS with greater visibility into digital asset transactions.

These reporting requirements are intended to improve the information available for tax compliance going forward. However, they do not automatically resolve errors made in earlier tax years, when investors may have relied on incomplete transaction records or misunderstood how different crypto activities were treated for tax purposes.

Andrew Gordon, executive director of Digital Asset Tax Action, said many investors had failed to report transactions correctly over the years. He argued that existing procedures do not provide a sufficiently predictable resolution process for taxpayers who discover that they made honest mistakes.

Errors can arise when investors misunderstand the tax treatment of crypto-to-crypto trades, use multiple exchanges or wallets, or assume that a taxable event occurs only when cryptocurrency is converted into cash.

The proposed program would create a dedicated framework for addressing these issues, potentially reducing uncertainty for taxpayers seeking to correct past filings voluntarily.

How the Proposed Disclosure Program Would Work

Under Section 502, eligible taxpayers would generally have 24 months from the program’s establishment to submit amended returns and resolve the relevant tax liabilities.

The proposal establishes different penalty structures depending on whether taxpayers certify that their violations were neither fraudulent nor willful. Those who provide the certification under penalty of perjury and file during the first 12 months would face a 0% penalty on the first $25,000 of tax deficiency per year and a 5% penalty on amounts exceeding that threshold.

Taxpayers who do not provide the certification would face higher rates: 25% on the first $25,000 of annual tax deficiency and 40% on amounts above it. The applicable rates would increase if taxpayers miss the initial filing window.

The bill also provides relief from specified civil penalties. For taxpayers who do not certify that their violations were non-willful, the proposal includes protection against criminal referrals based on information properly disclosed for the tax offenses covered by the provision.

These provisions would establish a more structured route for correcting historical reporting problems. However, eligibility, filing deadlines and the applicable penalty treatment would depend on the final legislation and the program’s implementation.

Existing IRS Procedures Serve a Different Purpose

The IRS already operates a Voluntary Disclosure Practice, but it is primarily intended for taxpayers who willfully violated tax rules and face potential criminal exposure.

Investors who made unintentional reporting errors can currently seek to correct them by filing amended returns. However, the proposed crypto-specific program would offer a defined penalty framework that its supporters argue is missing from the existing process.

Sharon Yip, a certified public accountant and founder of Crypto Tax Advisors, said some clients had failed to report crypto activity because they believed taxes were due only when they cashed out. Others relied on incomplete exchange records or incorrectly classified transactions.

Yip said a dedicated program could provide a defined correction period, more predictable penalties and greater certainty for taxpayers who voluntarily disclose their mistakes.

The distinction between non-willful errors and deliberate violations would remain important. The proposed reduced rates depend on an accurate certification that the violations were neither fraudulent nor willful, and falsely making that certification could carry consequences because it is submitted under penalty of perjury.

Investors May Need to Reconstruct Transaction Histories

Tax professionals recommend that investors review transaction records across exchanges and wallets to identify which tax years may require correction.

This can be particularly important for investors who used multiple platforms, transferred assets between wallets or conducted transactions for which historical records are incomplete. Establishing what happened, when it happened and how each transaction was reported can help determine the extent of any discrepancy.

Yip advised taxpayers who are uncertain whether their mistakes qualify as non-willful to seek professional guidance before making the required certification.

The potential need for corrections is underscored by a 2026 report from CoinTracker and Coinbase, which found that only 49% of surveyed crypto users correctly understood that selling cryptocurrency can be a taxable event.

That finding points to a gap in tax awareness, although misunderstanding the rules does not by itself determine whether a particular taxpayer qualifies for relief under the proposed legislation.

Outlook

The Digital Asset Tax Certainty Act could provide US crypto investors with a clearer mechanism for resolving historical reporting errors, particularly as broker reporting requirements expand the IRS’s visibility into transactions. Its practical impact will depend on whether the legislation becomes law, how the Treasury establishes the program and how eligibility is determined. Until then, investors should not assume that the proposed penalty reductions are available and may need to review past filings and transaction records under the existing rules.