Cryptocurrency has taken the world by storm. Whether you’re trading Bitcoin, holding Ethereum, or diving into NFTs, digital assets have become a popular way to invest and make money. But while crypto might seem like an exciting and modern way to build wealth, many investors don’t realize that it comes with tax responsibilities—just like stocks and bonds. If you’re not careful, you could end up in serious trouble with the IRS.
Crypto Is Taxed Like Stocks and Bonds
One of the biggest misconceptions about cryptocurrency is that it’s a completely separate financial system with its own rules. That’s not true. The IRS treats cryptocurrency as property, which means it’s taxed similarly to stocks, bonds, and other investments. Every time you sell, trade, or even use crypto to buy something, you might be triggering a taxable event. If you make a profit, you could owe capital gains tax. If you don’t report it, the IRS might eventually come looking for you.
Many People Forget to Report Their Transactions
Unlike traditional investment accounts, where brokers send tax forms to both you and the IRS, cryptocurrency exchanges don’t always provide the same level of reporting. This makes it easy for investors to forget—or even assume they don’t have to report—certain transactions. But just because you didn’t get a tax form doesn’t mean you’re off the hook. The IRS has been cracking down on crypto users who fail to report their gains, and penalties for noncompliance can be steep.
Crypto Tax Laws Are Always Changing
Another challenge with cryptocurrency taxes is that the rules are still evolving. The IRS has been increasing its efforts to track crypto transactions, and new regulations are frequently introduced. This can make it difficult for investors to keep up with what’s required of them. What was acceptable a few years ago might not be today, so staying informed is critical.
What Happens If You Owe Back Taxes on Crypto?
If you’ve been trading cryptocurrency and haven’t been reporting it properly, you might already owe back taxes. The IRS has the ability to track crypto transactions, even those done on decentralized platforms. If they find out you underreported or failed to report your earnings, you could face penalties, interest, or even an audit.
How a Tax Resolution Professional Can Help
If you’re worried about crypto-related tax issues, working with a tax resolution professional is the best way to protect yourself. An expert can help you correct past mistakes, negotiate with the IRS, and find the best solution for your situation. At ONeill Tax Resolution, we specialize in helping taxpayers resolve their IRS issues, whether they stem from cryptocurrency, unfiled tax returns, or other tax-related challenges. Don’t wait until the IRS comes knocking—get ahead of the problem today.
If you need help with crypto tax issues or any other IRS concerns, reach out to ONeill Tax Resolution for expert guidance.
