IRS adds crypto section to voluntary disclosure form for tax evaders

The Internal Revenue Service has revised Form 14457, the Voluntary Disclosure Practice Pre-Authorization Request and Application, to include a new section on reporting virtual currency as the agency cracks down on the use of cryptocurrencies like Bitcoin to evade taxes.

Form 14457 allows taxpayers who may be threatened with criminal prosecution for willful violation of tax law to voluntarily disclose information to the IRS that they have not previously disclosed. It has primarily been used in the past to disclose hidden offshore accounts, as well as estate and gift tax trusts and labor tax issues. However, even the 2019 version of the form had a checkbox to report virtual currency issues.

The IRS headquarters in Washington.

Andrew Harrer/Bloomberg

The IRS has now made several updates and additions to the form, including an expanded section for reporting virtual currency. The IRS Criminal Investigations Division now accepts photocopies, faxes, and scans of taxpayer signatures. Taxpayers can submit the form via eFax to (844) 253-5613 to reduce submission and processing times. Previously, Part II of this form had to be mailed. The new form also includes a penalty structure for labor tax and estate and gift issues, as well as a new checkbox for failure to pay in full.

The updates reflect feedback received from tax practitioners and other stakeholders and take into account trends in the type of financial assets taxpayers hold.

“This is an important form and process for people who recognize that it is better to go ahead and deal with their tax situation head-on, before facing tax measures. IRS enforcement,” said Doug O’Donnell, deputy commissioner for services and enforcement at the IRS. “The revised form includes a number of updates, and we encourage people to review the guidelines and consult with a trusted tax professional.”

Thousands of taxpayers have used the form since its introduction if they fear potential exposure to criminal acts and want to ensure they are complying with tax laws. Nevertheless, those who make such disclosures may still be subject to civil review and they must still pay all taxes, interest and penalties they owe.

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