Get help with unreported crypto income irs. 32 years resolving IRS problems. Free consultation from a crypto tax attorney.
If you have unreported crypto income irs from prior years, you have a problem - but it is a fixable problem. The question is whether you fix it on your terms or wait for the IRS to fix it on theirs.
How Unreported Crypto Income Gets Discovered
The IRS receives transaction data directly from exchanges through Form 1099-DA. They have obtained bulk customer records through John Doe summonses served on Coinbase, Kraken, and other platforms. They use blockchain analytics to trace transactions across wallets. If you traded on a US exchange and did not report the income, the IRS likely has the data to find the discrepancy.
Voluntary Disclosure vs. Getting Caught
Coming forward voluntarily before the IRS contacts you results in dramatically better outcomes. Voluntary disclosure typically means reduced penalties, no criminal referral, and more favorable treatment during the resolution process. Once the IRS contacts you first, your options narrow and the penalties escalate.
The Penalty Exposure
Unreported crypto income can trigger failure-to-file penalties of 5% per month up to 25%, failure-to-pay penalties of 0.5% per month up to 25%, accuracy-related penalties of 20%, and in extreme cases, civil fraud penalties of 75%. Interest compounds daily on top of all penalties. The total can quickly exceed the original tax owed.
The Fix
File the delinquent returns with accurate reporting. If you cannot pay the resulting balance, pursue resolution through an OIC, installment agreement, or CNC status. A tax attorney can guide you through the process and protect your interests at every step.