When you buy, sell, or trade cryptocurrency, the IRS crypto reporting, the U.S. tax authority's requirement to track and report digital asset transactions. Also known as crypto tax reporting, it's not optional—it's mandatory for anyone who touched crypto in the last year. The IRS doesn’t care if you used Coinbase, Binance, or a decentralized wallet. If you made a profit, sent crypto to a friend, or swapped one coin for another, you owe taxes—and they know.
The crypto taxes, the capital gains or income tax owed on digital asset transactions aren’t just about Bitcoin. Every time you trade ETH for SOL, use USDC to buy an NFT, or earn staking rewards, that’s a taxable event. The IRS cryptocurrency, the tax agency’s growing focus on blockchain activity and user compliance started with a simple question on Form 1040 in 2019: "Did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?" That one checkbox triggered audits, fines, and even criminal cases. In 2024, the IRS sent over 15,000 letters to crypto users who didn’t report. They’re not bluffing.
How do they track it? Exchanges like Coinbase and Kraken now send 1099-B forms directly to the IRS, just like stock brokers. Even if you used a non-KYC platform, the IRS can subpoena blockchain data, link wallet addresses, and cross-reference transactions with bank deposits. If you mined crypto or got airdrops, those count as income at fair market value the day you received them. Forget "I didn’t know"—ignorance isn’t a defense. The crypto compliance, the process of meeting IRS requirements for digital asset reporting and recordkeeping starts with keeping your own records: dates, amounts, values in USD, and transaction IDs. No spreadsheets? You’re already behind.
And it’s not just individuals. Businesses that accept crypto as payment must track every transaction as income. Freelancers paid in ETH? That’s taxable income. If you’re using crypto for payroll, you’re subject to payroll taxes too. The tax reporting crypto, the formal process of disclosing digital asset activity to the IRS through tax forms isn’t going away. It’s getting stricter. New rules in 2025 require brokers to report even peer-to-peer transfers. You can’t hide behind anonymity anymore.
What you’ll find below are real breakdowns of what the IRS actually wants, how to avoid penalties, and what happens when people get caught. Some stories are about people who paid thousands in back taxes. Others are about scams pretending to be IRS crypto help. There’s no magic fix. But there is a clear path—if you know what to look for.
Form 8949 is the IRS form you must use to report all cryptocurrency sales and trades. Starting in 2025, exchanges will send new tax forms, but you still need to track your own cost basis. Learn what to report, how to avoid penalties, and how to prepare.