A New Bill Prices Crypto Tax Amnesty. The IRS Wants 75% Otherwise.

Seventy-five percent. That's what the Internal Revenue Service can attach to an understated crypto return once it decides the error wasn't an error. A proposed bill in Washington wants to hand holders a cheaper exit.

The bill sets up a dedicated disclosure program for digital asset investors. Come forward, correct the old filings, pay the tax plus a reduced penalty. That's the trade on offer. Eligibility is limited. The fine print is still in draft. But the shape of it's obvious to anyone who has read an IRS penalty notice.

What the bill actually does

Here's the short version. A taxpayer with unreported or misreported crypto activity gets a defined path back into compliance. Instead of the standard penalty stack, they pay a smaller amount and close the file.

That stack isn't a rounding error. Civil fraud runs to 75% of the underpayment. The accuracy-related penalty is 20%. Failure-to-file adds 5% per month, capped at 25%. Failure-to-pay adds 0.5% per month, also capped at 25%. Interest layers on top of all of it. A $200,000 gain reported as zero can turn into a bill that swallows the gain and a chunk of principal.

The program trades that arithmetic for certainty. And certainty is the product being sold here.

Timing isn't accidental. Brokers are issuing Form 1099-DA for the first time, covering tax year 2025 activity, with copies landing in early 2026. The IRS is about to receive gross proceeds data on millions of accounts it never had visibility into. Backup withholding at 24% kicks in for accounts without a valid taxpayer identification number starting January 1, 2026.

The window where silence works is closing. Structurally, not rhetorically.

Who wins, who pays

Winners first. The taxpayer who flipped NFTs in 2021, moved size across three chains, and never reconciled a single lot. That person has a real problem and now has a real price for it. Accountants and tax attorneys win too. Every disclosure program is a billable engagement with a deadline bolted to it.

Exchanges win in a quiet way. Cleaner customer records mean fewer backup withholding headaches and fewer forced liquidations on noncompliant accounts. A 24% haircut on customer proceeds is bad for business. A program that nudges users to file a W-9 is good for it.

Losers? The people who assume the IRS won't cross-reference. That assumption just got more expensive. And enforcement-first practitioners lose ground, because a disclosure program converts potential fraud cases into settled files with a receipt attached.

Look at the incentive design. A reduced penalty is still a penalty. The government doesn't need to win in court if it can collect at the counter.

So why would anyone stay silent? Two reasons. Fear of the paper trail. And a belief that the cost of compliance exceeds the cost of getting caught. The bill attacks the second one directly. It does nothing about the first.

The data is unambiguous. The IRS is moving from voluntary reporting to third-party reporting, and it's doing it on a published schedule.

There's a real risk here and it's worth naming. Disclosure programs reward early movers and punish people who wait for perfect information. File under the program and the eligibility rules tighten later, you're exposed. Wait and the program closes, you're exposed. That's not a flaw in the bill. That's how every amnesty window in tax history has worked. History rhymes here.

The closest precedent is the 2018 offshore voluntary disclosure program. Fixed penalty structure. Hard deadline. The people who filed early did fine. The people who waited for a better deal generally didn't. Three consecutive years of unreconciled trading is exactly the profile these programs are built for.

One more thing. A disclosure program is only as good as its documentation requirement, and on-chain cost basis is messy. Bridge transactions, wrapped tokens, gas fees, failed transactions, airdrops with no reliable price at receipt. The IRS wants a number. Most holders have an approximation. The reduced penalty doesn't cover the accounting bill to get from one to the other.

The takeaway

Price the cleanup now. That's the conclusion. Not because this bill is law. It isn't. Because the direction of travel runs one way and the reporting infrastructure is already built and switched on.

Anyone holding unreconciled activity from 2021 through 2024 should be rebuilding cost basis this quarter. Not next year. The 1099-DA forms don't care about intent. They just report the proceeds and let the matching engine do the rest.

The bill offers a discount for honesty. That discount expires the moment the IRS finds the number first.

Not speculation. Arithmetic.