What Happens If You Hide Your Cryptocurrency Investments From the IRS?

With the IRS increasingly cracking down on crypto traders, many enthusiasts are eager to obscure their investments in hopes of minimizing their tax burden. This tactic rarely plays out as planned, however, especially as crypto exchanges and other resources can easily hand over incriminating information to the IRS. If caught, the consequences could be harsh, as detailed below:


If the IRS notes any discrepancies regarding your income and your tax return, you could be hit with an audit. Don’t assume that simply hiding or neglecting to report crypto income will keep you safe; increasingly, exchanges such as Coinbase are forced to hand over user information. Audits sparked by crypto investments are just as big of a hassle as conventional audits.

Failure-to-Pay Penalties

As with any tax obligation that remains uncovered, the IRS assesses a failure-to-pay penalty on outstanding crypto taxes. This constitutes 0.5 percent of the unpaid tax amount for every month that the taxes remain unpaid. This can add up quickly but is ultimately capped at 25 percent of the unpaid taxes.


Particularly severe cases involving hidden crypto could lead to tax evasion charges. The consequences can vary dramatically from one case to the next, but fines and imprisonment are not out of the question. The potential for serious consequences is that much greater in light of recent efforts from the Joint Chiefs of Global Tax Enforcement (commonly referred to as the J5). Comprised of five global powers — including the United States — the J5 aims to crack down on sophisticated tax evaders.

If you are currently under fire from the IRS, you owe it to yourself to seek help from a tax professional who understands the unique nature of your situation — and is willing to help. Contact the Highland Tax Group today to learn more about your options.