Made an ‘honest’ mistake with crypto taxes? New bill offers way out

Section 502 would require the Treasury secretary to create a Digital Asset Voluntary Disclosure Program. It is designed for people who failed to report digital asset transactions correctly in earlier years. The goal is to give non-willful taxpayers a clear route to fix mistakes instead of facing uncertain penalties.

Eligible taxpayers would generally amend their past returns and pay the unpaid tax, interest and a program penalty. Those who certify under penalty of perjury that their violations were neither fraudulent nor willful could receive the lowest rates. The program would also provide relief from specified civil penalties.

The proposal matters because many investors misunderstood crypto-to-crypto trades, used incomplete exchange records or thought tax was due only after cashing out. However, the program does not exist yet. Congress must pass the bill, and the president must sign it first.

The Digital Asset Tax Certainty Act, H.R. 10357, remains a proposal. The House Ways and Means Committee approved it 38-5 on September 16, but committee approval is only one stage in the legislative process. Section 502 therefore does not currently give taxpayers a special correction program.

Before investors could use it, the full House and Senate would have to pass the bill. The president would then need to sign it into law. If enacted, the Treasury secretary would have 12 months to establish the Digital Asset Voluntary Disclosure Program.

Only after that establishment would the program’s filing window begin. Taxpayers would generally have 24 months to submit amended returns. Until the proposal clears Congress and becomes law, investors must rely on existing procedures, whose penalty treatment the article describes as less predictable.

Section 502 would let eligible taxpayers correct past digital asset tax violations through amended returns. These filings would update the tax reporting for the years and transactions involved. The proposed process is meant to make voluntary correction more orderly and predictable for investors who made non-willful mistakes.

A taxpayer would have to pay the tax owed, plus interest and a program penalty. For example, someone who omitted taxable crypto activity from an earlier return could identify the affected year, calculate the deficiency, submit an amended return and make the required payment. The exact penalty would depend on certification and timing.

The bill also provides relief from specified civil penalties. Taxpayers would generally have 24 months after the program is established to file. Because false non-willful certification would carry a penalty of perjury, Sharon Yip advises professional guidance when facts are unclear.

Penalty rates would depend on both timing and whether the taxpayer certifies that the violation was neither fraudulent nor willful. A taxpayer making that certification within the program’s first 12 months would pay 0% on the first $25,000 of tax deficiency per year and 5% on any amount above it.

A taxpayer who does not certify would face 25% on the first $25,000 and 40% above that amount. The bill also says rates increase when taxpayers miss the initial 12-month window. Thus, the same deficiency could produce different penalties based on when the taxpayer applies and what the taxpayer can truthfully certify.

The article does not state a maximum penalty or the later rates. Certification is serious because it is made under penalty of perjury. Yip recommends reviewing exchange and wallet histories before deciding whether the mistakes were genuinely non-willful.

The IRS’s existing Voluntary Disclosure Practice is aimed at taxpayers who willfully broke tax rules and may face criminal exposure. That focus does not neatly fit ordinary investors who misunderstood crypto taxation or kept incomplete records. Such taxpayers can currently file amended returns, but the article says their penalty treatment is not predictable.

Section 502 would establish a dedicated digital asset program with a defined correction period and set penalty tracks. A qualifying investor could amend returns, pay tax and interest, and use the proposed certification route if the violation was neither fraudulent nor willful. The program would also provide certain civil-penalty relief.

This difference could fill a gap in the current system. Sharon Yip says ordinary reporting errors are common, including believing tax was due only after cashing out. The proposed program would offer reduced, predictable penalties and greater certainty, but only if Congress enacts it.

The Treasury secretary is central because Section 502 would require that office to establish the Digital Asset Voluntary Disclosure Program within 12 months after enactment. Without that formal setup, taxpayers would have no program window, penalty tracks or dedicated process to use. The proposal therefore depends on Treasury action after Congress and the president complete the lawmaking steps.

The IRS is central to the reporting environment. New 1099-DA broker reporting rules give it greater visibility into crypto transactions. For example, reports from brokers can help reveal activity that an investor failed to include on earlier returns, while also making future reporting easier.

The article describes a gap between improved reporting going forward and unresolved past mistakes. The proposed program would address that earlier period. It has not been established, however, because the bill has not yet become law.

Generally, selling cryptocurrency is treated as disposing of an asset, so the result can be a taxable gain or loss even if the investor does not withdraw cash. The taxable event is linked to the sale or exchange itself, not necessarily to moving money into a bank account. That is why “cashing out” is not always the deciding moment.

A crypto-to-crypto trade can create the same problem. An investor might exchange one digital asset for another, receive no dollars and still need to account for the transaction. The article identifies misunderstanding crypto-to-crypto tax treatment as one reason investors reported incorrectly across earlier years.

This confusion remains significant. A 2026 CoinTracker and Coinbase report found that only 49% of crypto users correctly understood that selling crypto can be taxable. The proposed disclosure program could help eligible investors correct past errors, but it is not law yet.