Cryptocurrency Tax Reporting: What You Owe and How to Stay Compliant

When you trade, sell, or earn cryptocurrency, a digital asset recorded on a blockchain that can be bought, sold, or used as payment. Also known as crypto, it behaves like property under U.S. law, not currency. That means every time you swap Bitcoin for Ethereum, cash out Dogecoin for dollars, or get paid in tokens, the IRS, the U.S. tax authority that tracks income and enforces tax laws. Also known as Internal Revenue Service, it requires you to report crypto activity just like stocks or real estate. You don’t need to be rich to owe taxes—just active. Even a $50 trade can trigger a taxable event. And if you think no one’s watching, the IRS has been matching wallet addresses with exchange data since 2019. Over 10,000 crypto users got audit letters in 2023 alone.

It’s not just the U.S. That’s the case. In Brazil, a country that now requires mandatory crypto reporting and caps forex transactions at $10,000. Also known as Brazilian Central Bank, its 2025 rules force users to declare every crypto transaction to avoid fines. Portugal lets you avoid capital gains if you hold crypto over a year, but Mexico’s FinTech Law demands businesses report all digital asset movements. And if you’re in China, forget about legal protection—owning crypto isn’t illegal, but you can’t legally report it either. The rules vary wildly, but the core truth doesn’t: if you moved crypto, you probably owe taxes. Ignoring it doesn’t make it disappear. The OFAC sanctions, U.S. government actions targeting illicit crypto networks tied to North Korea and Myanmar scams. Also known as Office of Foreign Assets Control, they’ve frozen wallets and blocked exchanges, proving the government tracks crypto like never before. If you’re involved in an airdrop, staking reward, or DeFi swap, that’s income. If you sold it later, that’s a capital gain. There’s no gray area.

Most people think tax season is the only time to worry. It’s not. You need records for every single transaction: when you bought, sold, swapped, or earned crypto. Tools like Koinly or CoinTracker help, but you still need to verify the data. Many who got hit with audits didn’t know their exchange didn’t report all their trades. Coinbase only gives you a 1099 if you made over $20,000—but you still owe taxes on smaller trades. And if you got tokens from a giveaway like the APTR airdrop or PAINT token, those are taxable when you receive them, not when you sell. The same goes for staking rewards from Aperture Finance or earning crypto through gaming like Hero Arena. Even if the token’s now worth pennies, you paid tax on its value at the time you got it.

What you’ll find below are real cases of people who ignored crypto tax reporting—and what happened when they got caught. Some lost money to scams like Wicked or WMDR, then couldn’t deduct losses because they never tracked the purchase. Others got slammed by the IRS after claiming zero income from airdrops they didn’t report. You’ll also see how countries like Portugal and Brazil handle it differently, and why some exchanges, like Libre or Blockfinex, make it harder to track your history. This isn’t about fear. It’s about clarity. You don’t need an accountant to get it right—you just need to know what counts, when it counts, and how to prove it.