Legislation progressing through the US Congress may soon offer crypto investors the chance to correct past tax violations involving digital assets, potentially easing concerns for those who failed to report prior trades.
House committee backs tax correction program
The House Ways and Means Committee approved the bill by a 38-5 vote. However, the proposal must still clear both the House and Senate, and receive the president’s signature before it becomes law.
If enacted, the bill would allow eligible taxpayers to amend previous returns to report crypto transactions, pay any owed taxes with interest, and settle a program-specific penalty.
Andrew Gordon, executive director of Digital Asset Tax Action, stated that the proposal could significantly assist ordinary taxpayers. He noted, “A large share of investors didn’t report correctly over the years,” and existing procedures lack a straightforward way for honest mistakes to be resolved.
Gordon also indicated that while recent 1099-DA broker reporting rules will likely simplify compliance moving forward, these measures do not address years prior to their implementation.
A large share of investors didn’t report correctly over the years, and existing procedures don’t offer taxpayers who made honest mistakes a predictable way to resolve their liabilities.
The new bill introduces a dedicated correction program for digital asset tax violations, offering clarity and a more standardized resolution path for non-willful errors.
Common reporting mistakes and limited current options
US crypto investors are navigating their first filing season under the new IRS 1099-DA broker reporting framework, which gives authorities greater visibility into crypto transactions.
Existing IRS procedures permit taxpayers with reporting mistakes to file amended returns, but penalties for such corrections are neither consistent nor clearly defined, often leaving taxpayers uncertain about their financial exposure.
Sharon Yip, a certified public accountant and founder of Crypto Tax Advisors, explained that many investors fail to report crypto activity due to misunderstandings about taxable events or reliance on incomplete exchange data. She said a specific program for digital asset taxes could address these gaps by establishing predictable penalties and a defined window for correction.
A crypto-specific program could fill this gap by providing a defined correction period, reduced and predictable penalties, and greater certainty for taxpayers who come forward voluntarily.
Yip highlighted that, in practice, numerous clients have either delayed reporting, assumed no tax was due before cashing out, or misclassified transactions because of limited guidance or recordkeeping challenges.
Currently, no standardized approach exists for non-willful crypto investors to ensure a clear path to resolution or consistent penalty outcomes.
Key provisions of Section 502
Section 502 of the bill lays out the mechanics of the proposed program. Taxpayers would generally be required to file amended returns within 24 months of the program’s start.
For those who certify under penalty of perjury that their errors were not fraudulent or willful, the penalty would be 0% on the first $25,000 of tax deficiency per year and 5% on amounts above that when filed within the first 12 months. By contrast, taxpayers who don’t certify would face penalties of 25% for the first $25,000 and 40% for additional amounts, with rates increasing if filings are delayed beyond the initial year.
| Certification | Penalty Rate (First $25,000) | Penalty Rate (Above $25,000) | Filing Timeframe |
|---|---|---|---|
| Certified (Non-willful) | 0% | 5% | First 12 months |
| Not Certified | 25% | 40% | First 12 months |
Those who do not certify their violations as non-willful are still shielded from criminal referrals for disclosed tax offenses covered by the provision. Additional relief is provided for certain civil penalties.
Yip advised taxpayers to thoroughly review their transaction histories across platforms and wallets, and to verify the non-willful nature of any errors before participating in the program. She further recommended professional assistance in uncertain cases, as falsely certifying non-willfulness carries a penalty of perjury.
A 2026 joint report from CoinTracker and Coinbase revealed that only 49% of crypto users correctly understood that selling crypto constitutes a taxable event, suggesting widespread confusion among investors.
Digital Asset Tax Action is a US-based advocacy and education organization that focuses on legislative and regulatory solutions related to digital asset tax compliance.
Mini dictionary: 1099-DA broker reporting rules, new IRS standards implemented in 2024 that require crypto brokers to provide transaction details to the agency, similar to 1099 reporting for securities, increasing transparency and compliance in crypto taxation.
