Crypto transactions are usually taxable – all crypto dispositions (other than certain gifts) are taxable events, and it’s taxable if you receive crypto as business revenue. Not reporting crypto gains or income can lead to audit risks, penalties, and potentially even criminal exposure.
The good news – you can often fix small mistakes by amending returns. Tax attorneys can help you deal with large errors, crypto audits, penalties, tax fraud charges, and other crypto-related tax problems.
Unsure if you’re supposed to report your crypto and worried about unreported crypto transactions? Then, contact us for help today, or keep reading to get an overview of the requirements and learn what happens if you don’t report crypto transactions correctly.
Key takeaways – quick answers to crypto questions
- What if I don’t get a 1099? Crypto transactions are often taxable even without a 1099.
- What are reportable events? Selling, trading, or spending crypto creates capital gains or losses, which must be reported.
- What if you don’t report crypto transactions? You’ll face penalties, tax assessments, or potential legal consequences if you willfully fail to report.
- How do I fix mistakes? You may be able to correct small errors by filing an amended return.
Crypto Reporting Requirements: Capital Gains and Losses
The following types of transactions are taxable events that should be reported on your income tax return:
- Selling: If you sell crypto for U.S. dollars or any other currency, you must report your gain on your tax return. That’s the difference between the price you paid for the crypto and the amount you sold it for.
- Trading: If you trade one type of crypto for a different kind of crypto, you also have to report any gain that you earned from the time you acquired the crypto to the time you traded it.
- Using: If you use crypto to purchase goods or services, you must report a gain if the crypto is worth more on the day you use it than it was on the day you acquired it.
All of the above scenarios are situations where you must report a capital gain from the disposition of crypto, but if you incur a loss in any of those types of situations, you can use the loss to reduce your gain.
Do you have to report crypto if you didn’t sell?
Yes, you must report all crypto dispositions, except in certain cases when you give away the crypto as a gift. However, there may be gift tax reporting requirements depending on the value of the gift. Otherwise, any time you get rid of (dispose of) crypto, you must report a gain or loss based on the difference in the crypto’s value between when you got it and when you got rid of it.
Here are some examples.
Using crypto to make a purchase – Say you bought crypto for $10,000, you held onto it for a while, and then you used it to buy something. At that point, the crypto was worth $12,000. That means you must report a $2,000 gain.
Trading crypto received as a gift – Now, imagine that a friend gave you crypto as a gift, and it was worth $800 (and the friend paid $800 for it). A few weeks later, you trade the crypto for a different type of crypto, but since its value has fallen, you only get $600 worth of the new crypto. As a result, you have a $200 loss.
Which Crypto Transactions Are Taxable?
To help you understand the taxability of various events, here’s a table outlining different types of crypto activities and how they’re taxed. For personalized advice, contact a tax attorney.
| Crypto Activity | Taxable? | Why |
| Buying and holding | No | It’s not taxable until a disposition occurs (i.e., selling, trading, or using the crypto to purchase something) |
| Selling for cash | Yes | Capital gain or loss based on the difference between the cost basis and the sale price. |
| Trading one coin for another | Yes | Treated as a sale, leading to a capital gain or loss |
| Using crypto to buy goods | Yes | Capital gain or loss based on the difference in value from when you acquired the crypto to when you disposed of it |
| Receiving as a business payment | Yes | Ordinary income that should be reported with the rest of your business revenue |
| Receiving as a gift | No (initially) | A taxable event occurs when you dispose of the crypto |
Note that the value of a crypto gain or loss is based on the difference between the crypto’s basis and the amount you get when you sell or trade the crypto, or its value when you use it to purchase goods or services. Generally, the basis is the crypto’s value on the day you acquired it, plus purchase costs, but it works differently with a gift. If you receive crypto as a gift, you use the giver’s adjusted basis, which is typically the value of the crypto the day they acquired it.
Reporting Crypto Received as Income
If you receive crypto during your business, you must report the crypto as income. Use the crypto’s fair market value on the day you received it, and simply report it with the rest of your income.
You don’t have to break out the crypto. You just report it with the rest of your revenue. To give you a simple example, imagine that you earned $100,000 USD from clients for graphic design work and received $12,000 worth of crypto from a couple of clients. You have $112,000 in revenue.
Now, once you collect the crypto and use it, you’ll have a capital gain or loss as described above. Again, you simply calculate the gain or loss by comparing the crypto’s value on the day you used it with the day you received it.
Sometimes, crypto is income, even if you don’t receive it during the course of your business. That happens if you receive an airdrop or if you mine crypto. In both cases, report the value of the crypto as other income on your tax return. If mining crypto is your business, report it with your business income on your business tax return.
How is Cryptocurrency Taxed
Crypto received as income is taxed as income and may incur self-employment tax and income tax depending on the situation. Crypto that results in a capital gain is taxed as a long-term capital gain if you have held the crypto for more than a year, and as a short-term capital gain if you held it for exactly one year or less.
Long-term gains qualify for a reduced capital gain tax rate and may even be taxed at 0% if your income falls below a certain threshold. Short-term gains are taxed at your income tax rate. You can claim crypto losses up to the value of your crypto gains, and you can use up to $3000 ($1500 for married filing separately) in crypto losses against your regular income.
If you have additional losses, you may be able to roll them forward and claim them against gains in future years. Another way to reduce capital gains taxes is to reinvest them in a Qualified Opportunity Fund.
Penalties for Not Reporting Cryptocurrency
Failure to report crypto can lead to audits, return adjustments, and the following penalties:
- Accuracy-related penalty – 20% of the unreported tax if negligence or significant income understatement was involved.
- Gross Misvaluation penalty – the accuracy penalty increases to 40% if you incorrectly report the value of the crypto by00% or more.
- Fraud penalties – 75% of the unreported tax for civil fraud.
- Criminal exposure – if the IRS believes you took willful actions to evade tax or defraud the government, they can recommend a criminal investigation into criminal fraud charges.
- Interest – backdated to the original due date that the tax should have been reported and paid.
Misconceptions About Reporting Requirements
Crypto is so new that people have all kinds of misunderstandings of the IRS’ reporting rules. Here’s the truth behind some of the most pervasive misconceptions.
- Myth: You don’t have to report crypto if you don’t receive a 1099—If you have any of the above transactions, you must report the crypto, whether you receive a 1099 or not.
- Myth: Small gains aren’t taxable—All gains are taxable. Even if it’s a small amount of money and even if you qualify for the 0% tax rate, the transaction must legally be reported on your tax return if you’re required to file.
- Myth: You have to report all crypto that you have—Generally, you only have to report crypto dispositions and crypto received as income. If you buy crypto or receive it as a gift, you don’t have anything to report until you use, sell, or otherwise dispose of the crypto.
- Myth: Hard forks are taxable events—On their own, hard forks aren’t taxable. But if you receive an airdrop of new currency after the hard fork, the airdrop is taxable income based on its fair market value on the day of reception. Report this income as other income on your 1040.
- Myth: Mined crypto is not taxed—If you mine crypto, you should report the crypto you get as income on your tax return.
If you have questions or concerns, you should contact a tax attorney or CPA who can guide you in the right direction.
How Does the IRS Know if I Didn’t Report Crypto?
The IRS discovers unreported crypto through multiple methods, including:
- Exchange reporting – The IRS requires exchanges to issue statements about crypto transactions.
- Matching systems – If the IRS receives a 1099 from a crypto exchange, its computers will notice if you didn’t report that info.
- Audits – The IRS looks for various red flags to select returns for crypto audits.
- Summons – The IRS can issue a legal summons to third parties, including exchanges, banks, etc, to get information about crypto transactions.
How to Deal With Unreported Cryptocurrency
So, what should you do if you realize that you had a crypto transaction that you should have reported but didn’t? Well, if it’s a relatively small amount of money or if you just made a mistake, you can usually fix the problem by filing an amended tax return.
- Use Form 1040X to amend your personal income tax return or amend business returns as needed to report crypto received as income.
- Attach Form 8949 and Schedule D to report capital gains transactions.
- Pay additional tax, interest, and penalties promptly.
- Request an installment agreement if you can’t afford to pay in full.
- Consult with an attorney if you’re worried about criminal exposure.
What if You Attempted to Evade Crypto Taxes?
Suppose you didn’t report the crypto in an attempt to evade the tax you owe. In that case, you may have acted fraudulently, and rather than amending your old tax returns, you may need to make a disclosure through the IRS Voluntary Disclosure Program.
The Voluntary Disclosure Program
The Voluntary Disclosure Program allows people who acted willfully in not complying with tax laws to minimize criminal exposure if they come forward voluntarily. To put it in plain English, if you fess up to the IRS, they will generally not pursue charges against you as long as you report all of the missing income and fully cooperate. The Criminal Investigation Unit reviews your disclosure and decides whether or not to accept your disclosure.
You should always consult with a tax attorney before making a voluntary disclosure. The attorney can help you decide whether you even need to use this program by determining whether your conduct was willful. If they do recommend this program, they can help you with the disclosure and figure out the best way for you to deal with your unreported crypto. Make sure you pick an attorney who has experience with crypto cases.
Get Help With Unreported Crypto Now
Cryptocurrency has created a lot of excitement and interesting waves in the world of currency, and it’s also made a lot of money for many people. Whenever people are making money, the IRS wants a slice of that income, and that’s why the agency is cracking down on crypto.
Don’t risk criminal exposure, failing audits, penalties, or other consequences. Instead, get help today. To learn more about dealing with unreported crypto, contact us today at (404) 609-1300 or fill out our consultation form to find out how our team of expert tax attorneys can help you get back on track with the IRS.
FAQ Crypto and Taxes
What is crypto tax evasion?
Tax evasion is a willful attempt to evade paying or owing taxes. It’s not just a simple mistake. It’s also much worse than negligence. Negligence means that you failed to exercise the right caution – for example, you engaged in crypto sales without researching the tax laws. Tax evasion means that you deliberately took an action to avoid taxes – for example, purposefully not reporting your crypto even though you knew the requirements and risks.
How do you report crypto losses?
Report losses on your tax return using Form 8949 or Schedule D. Your tax preparer can handle this, or you can very carefully follow the prompts on tax prep software. The loss will counteract your gains to reduce your taxable income.
Do you have to report crypto under $600?
Yes, although you may not receive a 1099 form, you must still report all crypto dispositions. If you sell, use, or trade crypto and it’s worth more than its basis (its value on the day you acquired it or the giver’s adjusted basis if it was received as a gift), the difference is a taxable gain.
Are crypto transactions reported to the IRS?
Many crypto transactions are reported to the IRS, but not all. As of 2025, the law requires crypto exchanges to file more reports than they used to.
What if I forgot to file crypto taxes?
If you simply forgot, you may be able to fix the situation by amending your return before the IRS contacts you. Otherwise, the IRs may adjust your return and send you a bill – for example, if they receive a 1099 from a crypto exchange and notice it’s not reported on your tax return.
