Do I have to claim crypto if I didn't sell any?
Yes, you may still be subject to taxes on your cryptocurrency gains even if you haven't sold or exchanged them for fiat currency or another cryptocurrency. This is because the IRS treats cryptocurrency as property, and any gains or losses from the sale, exchange, or use of cryptocurrency are taxable events.
Do you need to report taxes on Bitcoin you don't sell? If you buy Bitcoin, there's nothing to report until you sell. If you earned crypto through staking, a hard fork, an airdrop or via any method other than buying it, you'll likely need to report it, even if you haven't sold it.
In the US, you have to report your crypto losses on your trades the same way you would report your crypto gains. On Form 8949, you'll have to report each trade where you have a loss with the usual information: cost basis, sales proceeds, date of acquisition, date of sale, and loss on the trade.
US taxpayers who fail to report crypto on their taxes can face serious consequences, including fines and penalties as high as $100,000 and up to five years in prison.
Transactions related to crypto-assets often have tax implications and must be reported on your income tax return. If you're a crypto-asset user, knowing whether your transactions resulted in a capital gain (or loss) or in business income (or loss) is important because it may affect your taxes.
If you only bought but didn't sell crypto during the year, electing to hold it in a wallet or on a crypto platform, you won't owe any taxes on the purchase. Much like you wouldn't owe taxes for buying and holding stocks for your portfolio.
The IRS does not require you to report your crypto purchases on your tax return if you haven't sold or otherwise disposed of them.
The punishments the IRS can levy against crypto tax evaders are steep as both tax evasion and tax fraud are federal offenses. Depending on the severity, you can face up to 75% of the tax due, with a maximum of $100,000 in fines ($500,000 for corporations) or up to 5 years in prison.
Can you write off crypto losses on your taxes? Yes. Cryptocurrency losses can be used to offset your capital gains and $3,000 of personal income for the year.
US taxpayers must report every crypto capital gain or loss and crypto earned as income, regardless of the amount, on their taxes. Whether it's a substantial gain or a single dollar in crypto, if you experienced a taxable event during the tax year, it's your responsibility to include it in your tax return.
Will the IRS know if I don't report crypto?
If, after the deadline to report and any extensions have passed, you still have not properly reported your crypto gains on Form 8938, you can face additional fines and penalties. After an initial failure to file, the IRS will notify any taxpayer who hasn't completed their annual return or reports.
Will the IRS audit you for crypto? Yes. If the IRS has reason to believe that you are underreporting your crypto taxes, it is possible that they will initiate an audit or send you a warning letter about your unpaid tax liability.
Attempting to hide cryptocurrency from the IRS is illegal and can result in serious penalties, including fines and imprisonment. Exchanges such as Coinbase, Binance.US, and Crypto.com report customer data to the IRS, while many international exchanges like KuCoin, OKX, and Bitget might not.
With relatively few exceptions, current tax rules apply to cryptocurrency transactions in exactly the same way they apply to transactions involving any other type of asset. One simple premise applies: All income is taxable, including income from cryptocurrency transactions.
There is no way to legally avoid taxes when cashing out cryptocurrency. However, strategies like tax-loss harvesting can help you reduce your tax bill legally.
Even if you don't sell any of your crypto, you'd still need to answer the crypto question on Form 1040, including reporting your crypto income in your income tax return.
Wait for a long-term capital gains tax treatment
As a result, you need to keep track of all your trades and calculate your realized capital gains to prepare for paying your taxes down the road. However, if you hold your crypto for more than 12 months, you can enjoy a more favorable long-term capital gain tax rate.
You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return.
Because cryptocurrencies are viewed as assets by the IRS, they trigger tax events when used as payment or cashed in. When you realize a gain—that is, sell, exchange, or use crypto that has increased in value—you owe taxes on that gain.
Regardless of the specific form, crypto income is taxable income to the IRS. If you received crypto income, but did not include it on your tax return, you have unreported crypto income. Unreported crypto income is treated the same as other types of unreported income by the IRS.
Can you write off stolen crypto?
Similarly, theft losses used to be tax deductible. However, theft losses were also affected by the tax reform. They are now no longer tax deductible. So if you've lost your crypto due to a hack or scam, you cannot claim it as a loss and offset it against your gains.
If you are claiming an abandonment loss on a delisted, worthless cryptocurrency you have discarded, enter the amount of the loss using IRS Form 4797, Line 10.
Bankruptcy and Frozen Accounts
If your digital asset investment account is frozen or your digital assets are tied up in bankruptcy proceedings, you can't claim a taxable loss because you don't have a closed and completed transaction.
More recently crypto exchanges must issue 1099-K and 1099-B forms if you have more than $20,000 in proceeds and 200 or more transactions on an exchange the exchange needs to submit that information to the IRS.
Applicability to All Business Entities and Individuals Engaging in Business Activities: The first key point to understand is that the $10,000 crypto reporting requirement applies to payments received in the course of a trade or business.
