What Can Happen If You Don't Report Crypto on Your Taxes
"If I don’t report my crypto to the IRS, will I automatically be thrown in jail?"
The short answer is no, but that doesn't mean you're off the hook. Here are some other actions the IRS can take before resorting to jail time.
- Did you know that many exchanges already report to the IRS? When they send out 1099 forms, the IRS also gets a copy. If you decide not to report your crypto activity, you’ll be first in line for a crypto tax audit!
- The IRS can assess a 20% accuracy-related penalty on understated tax. For example, if you didn’t report your crypto and you owed $5,000 in taxes, the accuracy-related penalty would be $1,000. This penalty can be assessed for negligence or disregard for the rules.
- If the IRS does audit you and find you guilty of tax fraud, they can assess a 75% fraud penalty of the unpaid tax. This can even be done without opening a criminal investigation.
- What’s the worst case scenario? Prison! Any attempt to cheat the IRS can be considered tax evasion or tax fraud. Both of these are felonies and can have a maximum penalty of $100,000 and 5 years in prison per each tax year.
Bottom line is to always report your crypto! Not reporting just isn't worth it.
Disclaimer: The information provided pertains to the United States. Information contained in this post and in the comments is intended for general informational and educational purposes and does not constitute legal advice. Reading this post, reading the comments, receiving a reply to your comment, or sending a direct message to this account does not create an attorney-client relationship. Contact an attorney for legal advice regarding your specific situation