Introduction: Different Approaches to Tax Compliance
Tax authorities worldwide continue to refine their voluntary disclosure programs to encourage taxpayers with unreported income to come forward. Israel recently launched a new disclosure plan focusing on cryptocurrency and high-value assets. The United States, meanwhile, operates its longstanding IRS Voluntary Disclosure Program (VDP), which provides a path for taxpayers to avoid criminal prosecution if they truthfully disclose past tax noncompliance.
Understanding the differences between the U.S. and Israeli models, as explained by a U.S. tax attorney, helps taxpayers evaluate risks, compliance costs, and potential outcomes.
Israel’s New Voluntary Disclosure Plan
Israel’s new plan, introduced in February 2025, makes significant changes to its approach to voluntary disclosure.
- No Anonymous Track: Unlike past programs, taxpayers must identify themselves from the beginning.
- Green Track for Crypto: A streamlined process exists for cryptocurrency profits up to several hundred thousand shekels, allowing taxpayers to disclose with minimal interaction with the tax authority.
- High-Value Disclosures: Taxpayers with more than NIS 5 million in crypto assets or NIS 10 million in other assets must obtain approval from the Israel Tax Authority’s professional department.
- Revenue Goals: The government expects the new program to generate between NIS 2–3 billion in additional revenue.
The plan reflects Israel’s growing focus on cryptocurrency and digital assets as an area of enforcement.
The US IRS Voluntary Disclosure Program
The IRS Voluntary Disclosure Program (VDP), administered by Criminal Investigation, allows U.S. taxpayers who willfully failed to report income or assets to make a truthful, complete, and timely disclosure.
- Preclearance Required: Taxpayers must file Part I of Form 14457 to determine eligibility before proceeding.
- Civil Fraud Penalties: Participants typically face a civil fraud penalty of 75% of the highest year’s underpayment or offshore balance, making it an expensive but safer option compared to criminal prosecution.
- Closing Agreement: Once accepted, taxpayers sign a binding closing agreement with the IRS, providing legal finality.
- Limitations: The VDP applies only to willful violations. Non-willful errors must be corrected under the IRS streamlined procedures or other compliance programs.
- No Anonymous Submissions: Like Israel’s plan, identity disclosure is required from the outset.
The U.S. program emphasizes deterrence through steep penalties but provides certainty and reduced criminal risk for taxpayers who qualify.
Key Differences Between the U.S. and Israeli Disclosure Regimes
| Feature | Israel | United States |
| Anonymity | No anonymous submissions | No anonymous submissions |
| Fast-track option | “Green” track for smaller crypto disclosures | No fast track; all cases follow the standard VDP process |
| Asset thresholds | NIS 5M for crypto; NIS 10M for other assets | No asset-value thresholds; penalties apply regardless of asset size |
| Preclearance | Not specified for green track | Mandatory preclearance via Form 14457 |
| Penalties | Not specified; presumed tax only, potentially with leniency | Civil fraud penalty up to 75% of highest year’s liability |
| Applicability to crypto | Explicit crypto track introduced | Crypto tax treated like tax on any other asset, through VDP or streamlined path |
| Outcome certainty | Promises immunity from prosecution; details are less formalized | Closing agreement guarantees legal finality |
Pro Tax Tips
- For U.S. taxpayers: If you have unreported offshore accounts, cryptocurrency, or other willful noncompliance, the IRS Voluntary Disclosure Program remains the safest way to avoid criminal prosecution. The penalties are high, but the closing agreement provides certainty.
- For taxpayers with non-willful violations: Consider the streamlined procedures rather than VDP, since they carry reduced penalties.
- For dual US-Israeli taxpayers: If you hold assets in both countries, you may need to evaluate compliance under both regimes. The IRS has information-sharing agreements with Israel, so waiting to disclose may increase risk.
- For crypto holders: Israel’s focus on cryptocurrency reporting mirrors global trends. U.S. taxpayers should expect increased IRS scrutiny of digital assets and should disclose now rather than risk future enforcement.
Disclaimer:
This article provides broad information. It is only accurate as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on as tax advice. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a U.S. tax lawyer.