Crypto Tax Mistakes to Avoid When Filing Taxes

Q: What happens if I get audited by the IRS?

If you’re audited, the IRS will review your transactions and tax filings for discrepancies. Keep records for at least three years, and use crypto tax software to maintain accuracy. For detailed guidance, visit our crypto tax audit guide.

Q: Will I get audited if I don't report crypto?

Failure to report crypto activity can raise red flags and increase your risk of an audit. Even small omissions can trigger IRS scrutiny, so ensure your filings are complete.

Q: What happens if you don’t file crypto taxes?

Failure to file can lead to penalties, fines, and even criminal charges. Filing late is better than not filing at all, and the IRS offers options to amend returns if needed. Learn more about what happens if you don’t file crypto taxes.

ByTynisa (Ty) Gaines, EA · Reviewed byZac McClure, MBAUpdated on June 1, 2026 · minute read

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The IRS can track crypto activity through exchange reporting, blockchain analysis, and data matching. Report taxable events such as trades, airdrops, and staking rewards accurately to avoid penalties, audits, or other issues.
Good records are the foundation of clean crypto tax reporting. Track cost basis, proceeds, income, and capital gains, and use crypto tax software like TokenTax to organize your data and reduce filing mistakes.

Why trust our crypto tax experts

At TokenTax, we create original content to educate and empower the many crypto investors we serve. Our informational articles reflect the latest tax guidelines from agencies worldwide and are regularly updated to be accurate, actionable, and current. Certified tax professionals research, write, and review each piece to combine industry expertise with rigorous fact-checking. Whether you're navigating DeFi, NFTs, or complex trades, TokenTax is your trusted partner in the complex, evolving world of crypto taxes.

The most common crypto tax mistakes in the US

Crypto tax reporting can be complex, and certain errors are particularly common. Avoiding these mistakes can help you stay compliant and reduce your tax liability. Here are some of the most common crypto tax mistakes every crypto user should try to avoid.

Underestimating the IRS’ ability to trace your crypto activity

The IRS can get crypto activity data from multiple places, including exchange records, third-party reporting, and blockchain analysis. Do not assume they see everything, but do assume they can ask for documentation and compare what you report to information they receive from other sources.

Ignoring or misreporting airdrops

Certain airdrops can be taxable when you have dominion and control over the tokens you receive. The IRS has specific guidance for airdrops following hard forks, and other airdrops can be fact-dependent. If you later sell, swap, or spend tokens you received, that later disposal is a separate capital gain or loss event.

These must be reported accurately, even if the tokens were unsolicited.

Guessing or averaging cost basis

Accurately calculating your crypto cost basis (the original purchase price of your crypto with fees) is critical. Use tax software like TokenTax to track the cost basis for all your transactions and avoid errors.

Not filing because you can’t pay

Even if you can’t pay your tax bill in full, you must file your crypto taxes on time. The IRS offers payment plans to help taxpayers manage their obligations.

Not claiming capital losses

Crypto losses can offset gains and reduce your taxable income. Use Form 8949 and Schedule D to report these losses and ensure you benefit from applicable deductions.

Failure to report every taxable crypto transaction

Not every crypto transaction needs to appear on your tax return. You generally report taxable disposals (like selling, swapping, or spending crypto) and taxable income events (like rewards or crypto paid for work). Buying crypto with USD and moving crypto between wallets you own usually does not create a taxable event, but you still need records so your cost basis and transfers get tracked correctly.

Ignoring crypto-to-crypto trades

Crypto-to-crypto trades are taxable events and must be accounted for. Record the fair market value of each trade to calculate capital gains or losses.

Overlooking tax obligations for mining or staking rewards

Mining and rewards from staking crypto are taxed as income when received and are subject to capital gains tax upon disposal. Keep detailed records to track income and calculate gains accurately.

Failure to report foreign crypto exchange activity

If you use offshore exchanges, you still need to report these transactions. The IRS is increasingly targeting unreported foreign crypto activity through international agreements.

Relying on exchange-provided tax documents

Exchange-provided tax forms may be incomplete or inaccurate. Cross-check all data and report any transactions missing from these documents to avoid errors.

Neglecting to report crypto-related income

Income from crypto lending, staking, and other activities must be reported. Record the fair market value of received income and track subsequent disposals for accurate reporting.

Use crypto tax software like TokenTax to simplify the process and help minimize tax liability.