The IRS treats unreported cryptocurrency as tax evasion. Here's exactly what happens when they catch up - and they will catch up.
Every tax return filed since 2019 asks a direct question: did you receive, sell, send, exchange, or otherwise acquire any digital assets? If you answered no - or didn't file at all - and you had crypto activity, the IRS considers that a false statement on a federal tax return.
The Question on Every Return
Starting with the 2019 tax year, the IRS added a cryptocurrency question to Form 1040. It moved from Schedule 1 to the top of page one in 2022. There is no ambiguity. Checking "no" when the answer is "yes" is a misstatement under penalties of perjury. The IRS treats it that way.
How the IRS Discovers Unreported Crypto
Every major U.S. exchange - Coinbase, Kraken, Gemini, Binance.US - files information returns with the IRS. Forms 1099-MISC, 1099-B, and 1099-K report your activity. John Doe summonses compel exchanges to hand over customer records in bulk. Blockchain analytics firms under government contract trace on-chain transactions. The IRS Criminal Investigation division has a dedicated cyber unit. The notion that crypto is invisible to the IRS ended years ago.
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