Your Crypto Tax Answers

Learn about crypto taxes in the US, Australia, and Germany with insights from professional crypto tax accountants while discovering the best crypto tools in the market.

What happens if you don't file crypto taxes?

Updated: Jun 19

Have you ever wondered what happens if you don’t file your crypto taxes? Well, there are consequences to misreporting or a complete lack of reporting your taxes on taxable transactions, including cryptocurrencies.


Today, we are covering what happens if you don’t file crypto taxes, explaining the current landscape of taxation rules and reporting requirements, including clarifying commonly asked questions about crypto tax reporting.


In this article:


Do I have to file crypto taxes?


Yes. You have to report your gains/losses from crypto trading and report any income you earn from crypto-related activities, besides answering the “crypto question” on the top of the first page of your Form 1040.


How do taxes work on cryptocurrency?


In the US, if you trade cryptocurrencies, you have a taxable event, subject to capital gains taxes. These taxable events include any trade of crypto-to-crypto, crypto-to-FIAT, crypto swaps on decentralized exchanges, etc. Any sale of crypto will lead to a capital gains scenario. Additionally, when you spend your crypto to pay for goods/services, you’ll also be subject to capital gains taxes.


Other crypto activities such as receiving a hard fork, airdrops, crypto interest, staking rewards, new tokens through yield farming, or your salary in crypto will be treated as income. These items will be subject to ordinary income taxes instead of capital gains taxes.


How do I report income from cryptocurrency?


You need to report the Fair Market Value (in USD) of the crypto you received in activities as airdrops, crypto interest, staking rewards, crypto salaries, or yield farming at the time of your receipt on your income tax return.


If you trade crypto, you’ll have to determine the gain/loss on each trade and report it on Form 8949 and Schedule D of your tax return. If you have a profit at the end, you’ll likely pay capital gains taxes in the US.


Find out more on how to report crypto taxes.


What happens if you don't file cryptocurrency on taxes?


If you don’t file crypto on taxes, you’ll likely be audited, get a letter from the IRS with taxes due, need to pay interest and penalty, or in more severe cases, face legal action.


In the US, you have reporting obligations regarding cryptocurrencies, and if you don’t comply, you’ll have to face the same legal consequences as if you misreported or don't file taxes in general.


Do you have to report crypto if you don't sell?


In short, no. If you only buy crypto with USD and hold it without ever selling, you won’t have to report any capital gains or income. However, you still have to answer the “crypto question” on IRS Form 1040. If you only bought crypto and didn’t sell, you can answer “No,” given the changes made to the 2021 form.


Anytime you receive compensation in crypto, you need to report income as we stated above, and any time you sell crypto, you need to determine gain/loss on the trade and report it.


Can the IRS track cryptocurrency?


Yes. The IRS has many ways and tools to track cryptocurrency activity.


Recently, thousands of crypto investors received letters with amounts due in taxes related to crypto activities since the IRS has the ability to track crypto. If you received one of these letters, a crypto tax CPA could help you correctly access the amount you really need to pay and make sure you’re compliant from that moment forward.


Does Coinbase report to the IRS?


Coinbase has been issuing Form 1099-K to some of their customers for the past few years, and they will continue to issue 1099. Crypto exchanges in the US like Coinbase could be enforced to transmit data of users to the IRS as it has happened in the past because of anti-money laundering initiatives and to track taxpayers who don’t file their crypto taxes.


Do all crypto exchanges report to the IRS?


An exchange in the US can be obliged to transmit information about users to governmental entities, including the IRS. Under the new law passed recently, it looks like all the US based exchanges will need to issue some kind of tax reports to their customers and the IRS.


Do I pay taxes on crypto if I lose money?


You might if you traded crypto and had a profit but then traded more and had losses, you’ll still have to pay capital gains taxes on the trade where you had a profit. Let’s see an example.


You bought 1 Bitcoin at $10K. You’ll later sell that Bitcoin for $20K. Later, you buy 1 Bitcoin again at $22K, and then it drops sharply, and you sell it at $15K.


In the first trade, you had a $10K profit, leading to capital gains taxes. The tax rate will depend on your holding period. If the trade of Bitcoin at $20K happens after 12 months of holding it, you’ll have a long-term capital gains tax rate, ranging from 0% to 20%. If you hold it for less than 12 months, you’ll have a short-term capital gains tax rate, ranging from 10% to 37%.


In the second trade, you had a loss of $7K. Since you had a profit before, you can offset this loss from the $10K gains you had before. If these were the only trades you did during the tax year, the capital gains would only be $3K instead of $10K, but you still have to pay taxes even though you also had a loss.


Can you write off stolen crypto?


In the US, you won't be able to claim a loss for stolen crypto. According to the current tax law, stolen crypto is considered a personal casualty loss, which is no longer tax-deductible. Find out more about taxes on stolen, hacked, or lost crypto.


Learn how to create tax reports with CoinTracking:


The best crypto tax calculator: CoinTracking


The best crypto tax software to import and track your trades is CoinTracking.


You can import your trades using our CSV or API imports from hundreds of other exchanges, track your gains/losses, and generate tax reports according to your preferred accounting method.


CoinTracking is your full crypto tax solution for:

Crypto taxes with no errors: CoinTracking Full Service in the US.


CoinTracking also offers a Full Service for crypto traders in the US. A crypto reconciliation tax expert from Polygon Advisory Group, a leading US crypto tax firm, will review your CoinTracking account, help fix any errors, and ensure you submit your crypto tax reports error-free.


Do you have any crypto tax questions? Check the best guides:

  1. Do you pay taxes when trading stablecoins?

  2. How is Yield Farming Taxed?

  3. DeFi Taxes: The Complete Guide.

  4. How to save taxes with a Bitcoin IRA.

  5. Do you pay taxes for receiving Bitcoin tips?

  6. Uniswap Taxes Guide

  7. Is wrapping crypto taxable?

  8. How to calculate taxes with Bitcoin dollar-cost averaging?

  9. Do you pay tax on stolen, hacked, or lost crypto?

  10. FIFO for crypto taxes? Implications of accounting methods.

  11. NFT Taxes: The Complete Guide.

  12. 2021’s NFT guide (with taxes).

  13. Is Bitcoin taxable? The ultimate guide for 2021 taxes.

  14. Do you pay taxes on Bitcoin debit cards purchases?

  15. Top crypto tax friendly countries.

  16. How to reduce your crypto taxes?

  17. Crypto tax loss harvesting: Here’s what you need to know

Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.