What Happens If You Do Not Report Crypto Taxes?
Skipping crypto on your taxes can bring IRS penalties, interest and an audit. A willful failure to report can lead to criminal tax evasion charges.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
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The rule behind that answer: for federal tax purposes, virtual currency counts as property rather than currency. Notice 2014-21, released in 2014, set out that position. Form 1040 asks whether you had digital asset transactions, and you must check Yes or No.
What happens if you do not report?
Unreported taxable crypto gains or income can trigger IRS penalties and interest. The agency can also audit the return. A willful failure to report can lead to criminal tax evasion charges.
Which crypto actions are taxable?
Selling crypto, swapping one digital asset for another, spending it, and earning it are taxable events. Buying crypto with US dollars and holding it are not. Moving crypto between wallets you own or control is not taxable either. A sale, swap or income event must be reported even with no taxable gain.
- A sale for dollars usually produces a capital gain or loss.
- A swap is taxable even if you did not cash out.
- Paying for goods or services with crypto counts as a sale.
- Crypto paid as wages, and mining or staking income, is ordinary income.
Where do you report crypto on taxes?
Gains and losses from sales and swaps go on Form 8949. The IRS pointed filers to that form for digital asset disposals in the 2023 tax year. Crypto income is ordinary income and goes where your other ordinary income goes. Wages paid in crypto are reported as wages, and independent contractor work goes on Schedule C.
Which tax year matters?
The date of the sale, swap or income event fixes the tax year, and the tax year fixes which return you file. A 2023 trade goes on your 2023 return, which you file in 2024.
If you left crypto off that return, you correct that year, not the current one.
Frequently asked questions
Exchanges generally send the IRS information returns about customer trades. A form you do not receive does not make a trade nontaxable.
Yes. You file Form 1040-X to correct a return you already sent. The IRS recalculates the tax and may charge interest.
A capital loss can offset capital gains, and a limited amount of leftover loss can offset ordinary income. You still report the trade, and a loss does not remove the reporting requirement.
Usually three years from the later of the due date or the date you file. The window is longer for a substantial omission and does not close for a fraudulent return.
