Crypto Tax: Coming into Compliance
Coming in from the Cold
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You’re Not Alone
Reporting cryptocurrency transactions is confusing. The IRS has provided limited guidance, record-keeping is a major headache, there are new rules every year . . . and you may simply feel overwhelmed.
Perhaps you did not report your crypto transactions correctly in a prior year? Or did not report them at all? And perhaps you’re reading this because some part of you knows that this situation needs to be fixed?
Good. You’re here, reading this. Facing your problem is the first step.
Why Come Forward Voluntarily?
I will not sugarcoat this: coming into compliance means paying back taxes, penalties, and interest. That is never fun.
But consider the alternative. The IRS is getting better at finding unreported cryptocurrency income. Exchange data is being reported. Blockchain analytics tools are improving. And beginning with tax year 2025, many exchanges will report certain digital asset transactions directly to the IRS on Form 1099-DA.
The window between “the IRS doesn’t know” and “the IRS knows” is closing. And the consequences of being found are considerably worse than the consequences of coming forward.
When you disclose voluntarily, the IRS is more likely to view you as a taxpayer who, once upon a time, had made mistakes, and is now trying to make them right. When they find you first, they may be less sympathetic.
What Does Coming into Compliance Look Like?
The process depends on the scope of the issue.
In general terms:
We reconstruct your crypto transaction history for all tax years. We calculate the correct income and capital transactions for the relevant tax years. We prepare amended returns (or original returns, if none were filed). We help you self-assess appropriate penalties and interest.
Then you file. In many cases, the IRS processes the returns, accepts the payments, and takes no further action. When that happens. your filing issues for those past years have been addressed, subject to future IRS review.
While IRS has not provided detailed guidance on every crypto issue, that does not relieve you of the crystal-clear obligation to report and pay tax on "income from whatever source derived." In some situations, the lack of detailed guidance may help support an argument that any errors were made in good faith, not with the intent to evade tax. These are legal and factual questions that should be evaluated with a qualified tax advisor or tax attorney.
An Important Side Benefit
Once you’ve come into compliance by reporting overlooked prior-year income, you may have also established that cryptocurrency held today can qualify for long-term capital gain treatment if held for more than one year. BTC has pulled back sharply from its 2025 highs. Ideally, you’ll be selling the BTC for well over $1,000,000 in the not-too distant future. (Not only am I not an attorney, I’m also not an investment advisor.)
How Serious Is Your Situation?
Every situation is different:
Under $250,000 in unreported prior-year income
In many cases, taxpayers in this range choose to amend the relevant returns and self-assess penalties and interest rather than use a formal IRS voluntary disclosure program. Whether that approach makes sense for you depends on your specific facts and risk tolerance. We can handle this process for you directly.
This approach is not risk-free. IRS may use the fact of the amended returns to initiate an audit or other enforcement action. In our experience, IRS is generally disinclined to throw the book at taxpayers who come forward on their own, pay what they owe, and demonstrate good faith. Outcomes always depend on the specific facts and IRS discretion.
Over $500,000 in unreported prior-year income
At this level, I would advise you to engage a tax attorney before filing anything. I am not a tax attorney, but I can help you find one who understands crypto.
Your tax attorney could then engage a CPA firm (us, for example!) to handle the technical work of building a complete dataset of transaction histories, calculating income and capital transactions, and preparing the returns.
Between $250,000 and $500,000
This is the gray zone. Whether you need a tax attorney depends on the specific facts. (For example, amending a 2024 reporting error of $300,000 in 2026 may not be a big deal, or it may be a very big deal.)
I am not an attorney. I would be happy to refer you to tax attorneys who could better evaluate the facts and circumstances.
Addressing the Fear
Let me address the question you’re probably too nervous to ask: Am I going to jail?
Look to a tax attorney for the answer to your specific situation. But I’ll try to answer in general terms.
In the vast majority of cases involving unreported cryptocurrency income, the answer is no. The IRS pursues criminal prosecution for willful tax evasion—deliberate, knowing, systematic concealment of income. That said, only a qualified tax attorney can assess your specific criminal exposure.
The typical situation I see is a person who made money in crypto, didn’t fully understand the reporting requirements, didn’t know how to calculate the gains even if they did understand the requirements, and let the problem grow because dealing with it felt overwhelming. In most such cases, the core issue is a tax problem rather than primarily a criminal one, and tax problems generally have tax solutions.
The IRS is a tax collection agency. Its primary mission is to collect tax, not to put people in jail. For many taxpayers, coming forward, paying what they owe, and demonstrating good faith resolves the matter. Outcomes can vary, so it never hurts to discuss your situation with a tax attorney first.
We Respect Your Privacy
Everything you share with our firm is treated with strict professional confidentiality in accordance with applicable standards and law. One important caveat: CPA-client communications do not carry attorney-client privilege. When potential criminal exposure is a concern, I recommend engaging a tax attorney first.
When I work under the direction of your attorney, some or all of our communications may be protected by the attorney-client privilege and/or the attorney work-product doctrine, depending on the circumstances and applicable law.
Can we talk informally before an accountant-client or attorney-client privilege is established? Yes, as long as we keep the discussion on a high level and in terms of hypotheticals. For example, ‘I have a friend who might have messed up their crypto reporting’ is fine; a blow‑by‑blow confession of specific acts should wait until you’re formally engaged with a professional (ideally a tax attorney).
Ready to Get This Resolved?
The longer you wait, the more penalties and interest accrue, and the greater the risk that the IRS finds you before you find them.
Schedule a free, no-obligation thirty-minute consultation. We’ll talk through your situation, give you an honest assessment, and lay out a path forward.
Schedule Your Free Consultation
If you “have a friend” in this situation, feel free to pass along this page. Your friend can reach me directly, and I will never know who sent them.
Disclaimer (Bill Brock Is Fond of His CPA License)
This material is for general informational purposes only and is not intended to be, and should not be relied upon as, tax or legal advice. You should consult with your own tax advisor or tax attorney regarding your specific facts and circumstances.
Already Received an IRS Notice?
If you’ve already received a notice from the IRS (a CP2000 matching notice, an audit letter, or any other correspondence) that’s a somewhat different situation. See our IRS Notices & Audits page for guidance specific to responding to IRS contact.