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Simply import your transaction data to Summ (formerly Crypto Tax Calculator) and let it do the hard work for you.
Summ provides tax reports for all previous years at no extra charge, helping ensure that you get your reporting up-to-date and compliant, even if you’re behind on previous years.
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Yes, CoinLedger offers a free version with portfolio tracking and unlimited transactions. To gain access to any reports, you’ll need to upgrade to a paid plan.
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Yes, Summ is free to use instantly when you sign up, allowing you to gain a full picture of your crypto portfolio, with support for up to 100,000 transactions. Take advantage of the smart suggestion and auto-categorization engine, portfolio tracking, unlimited integrations, DeFi and NFT support.
To access the reports, the tax loss harvesting tool and priority support, you will need to upgrade to the appropriate paid plan.
In most cases of buying and selling cryptocurrency as a retail investor, you are participating in investing rather than trading. The two are treated differently for tax purposes.
The key difference between investing and trading – along with the different tax treatments, is how losses generated in the crypto-activity can be used.
In their guidance, HMRC have explicitly stated that they would expect it to be exceedingly rare that any crypto-activity constituting buying & selling crypto would be classified as “trading”.
If you are uncertain, speak to a tax advisor as there are always exceptions, including but not limited to, developing tokens and large scale mining.
You can be liable for both capital gains and income tax depending on the type of cryptocurrency transaction, and your individual circumstances. For example, you might need to pay capital gains on profits from buying and selling cryptocurrency, or pay income tax on interest earned when holding crypto.
These are the tactics the IRS uses to collect data, track crypto and match it to your identity. And what to do if you've get audited.
.png)
Whether you’re a long-term crypto holder or have recently started trading, you may wonder: does the IRS know about my crypto?
The short answer is: Yes, they do.
The days of flying under the radar as a crypto user are well and truly over.
In 2015, the IRS began working with blockchain analytics companies like Chainalysis to monitor blockchain transactions. Fast forward to today, and in 2025, new cryptocurrency tax regulations make it easier for the IRS to track your crypto trades.
Centralized exchanges – such as Coinbase and Binance – will be required to report user transactions, and you’ll be expected to include this on your 2025 tax return.
This will make it easier than ever for the IRS to link your real identity with your on-chain transactions, which are already publicly available and easy to link.
Let’s look at how the IRS tracks your crypto, how long it’s been monitoring cryptocurrency for, what you need to report, the penalties for non-compliance, and most importantly, what to do if you’re behind on your reporting or get audited. We also take a look at new rules that are set to be introduced between 2026-2030.
{{irs-knows-your-crypto-callout1}}
{{irs-knows-your-crypto-cta1}}
The IRS has significantly strengthened its ability to track cryptocurrency transactions with the introduction of Form 1099-DA in 2026, effective from the 2025 tax year. This new form represents the most comprehensive crypto reporting requirement to date.
Starting in 2026, the IRS will receive copies of every 1099-DA form issued by crypto brokers, giving them unprecedented visibility into your crypto trading activity. This includes:
The most critical issue is the mismatch between what brokers report and what you actually owe. In 2026, brokers will only report gross proceeds — not your cost basis. Your 1099-DA might show $50,000 in proceeds, but the IRS won't know you only made $5,000 in actual profit.
If you don't provide the IRS with the correct information, then you could massively overpay on your tax. For instance, if you had $50,000 of proceeds and a cost basis of zero, but only made $5,000 in actual profit, the IRS would expect you to pay tax on a 100% gain of $50,000, instead of a 10% gain of $5,000.
This is why checking your 1099-DA against your actual transaction history is so important. You can use software like Summ (formerly Crypto Tax Calculator) to reconcile your transaction history with your 1099-DA form, identify any inaccuracies or missing cost basis, and report the accurate figures on your Form 8949 to ensure you pay the correct amount of tax.
Without comprehensive tracking that software like Summ provides, you risk significant penalties if the IRS compares your tax return against multiple 1099-DA forms and finds discrepencies.
In 2025 new IRS regulations require brokers to report customer transactions, making it easier for tax authorities to track crypto activity.
These rules apply to brokers who “take possession of the digital assets being sold by their customers, including operators of custodial digital asset trading platforms, certain digital asset hosted wallet providers, digital asset kiosks and certain processors of digital asset payments (PDAPs),” according to the IRS.
This includes centralized crypto exchanges like Coinbase, stock trading platforms that sell crypto like eToro, and trading apps like Robinhood.
Starting January 1, 2025, brokers will begin tracking your transactions and reporting gross proceeds to the IRS. These transactions will be reported on Form-1099-DA, which will be sent to both users and the IRS in early 2026. By 2027 (for the 2026 tax year), brokers will start tracking and reporting your cost basis on the 1099DA, which means the IRS will have a thoroughly detailed view of your crypto ownership.
Similar to other 1099 forms used for reporting traditional investment income, information on Form 1099-DA will need to be added to your 2025 tax return. If you don’t include it, the IRS will notice as they already have the data, which will increase your chances of being audited.
These new regulations aim to “improve detection of noncompliance in the high-risk space of digital assets,” said IRS Commissioner Danny Werfel.
Transactions reported to the IRS include withdrawals to wallets, which means that the IRS is aware of your on-chain trading activity.
Contrary to what many people think, DeFi transactions and trading are taxable events that must be reported on your tax return. Failure to report could result in serious fines or penalties.
Since the 2020 tax season, every taxpayer has been required to answer a crypto-specific question on Form 1040: At any time during the year did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?
This broad question means that you’ve interacted with crypto in any way – even if you just held bitcoin – you would need to answer “yes.” The IRS introduced this question to track your crypto activity over time, ensuring they can monitor future transactions when you eventually sell.
Following the 2021 Build Back Better Act, crypto exchanges began issuing 1099-K and 1099-B forms to users in 2023. These forms were sent to traders–and then the IRS–who had more than $20,000 in proceeds and 200 or more transactions on an exchange. If you received one of these tax forms, the IRS is already aware of some of your crypto trades.
Even though during this time crypto taxes operated on a voluntary system, you were supposed to volunteer information about your trades and how much you owe.
However, the IRS identified cryptocurrency as one five problem areas where taxpayers could evade taxes and began criminal proceedings against tax avoiders. If you received a letter from the IRS stating you are under investigation, you were generally no longer eligible to voluntarily declare back-taxes and faced potentially reduced penalties.
Back in 2014, the US government declared all forms of digital currency as property, meaning when it was sold it was subject to tax. While crypto was originally envisioned as an alternative to government-issued currency, this ruling first signalled that regulators were interested in making some money from it.
By 2015, records indicate that the IRS had begun collaborating with blockchain technology companies, placing an order for work with Chainalysis in August of that year.
In December 2016, the IRS issued a summons to Coinbase, demanding records for over 500,000 customers who had traded crypto in previous years. Initially, Coinbase was required to provide user details for anyone with a single transaction–deposit or withdrawal–larger than $20,000.
The information Coinbase was required to provide included:
With access to this information, the IRS had a clear path to identifying who owed them money, and could estimate the amount owed in many cases.
In terms of accounting,cost basis reporting rules will come into effect in 2026. Your cost basis is the total amount you paid for a crypto asset, plus any transaction fees.
Initially scheduled for 2025, the new tax reporting rules require centralized crypto exchanges to change to the First In, First Out (FIFO) method of calculating capital gains unless otherwise specified by the user. FIFO considers the earliest bought crypto assets are sold first, which could result in higher capital gains taxes during market fluctuations.
These changes will require you to identify the cost basis of your assets for each individual wallet or exchange account. You must take action by 31 December 2025 to ensure compliance by 2026.
{{irs-knows-your-crypto-cta2}}
Starting in 2027, certain digital brokers will be required to issue Form 1099-DA to taxpayers, reporting crypto asset proceeds from broker transactions to both users and the IRS.
For years, DeFi protocols have been operating in a grey regulatory environment, but that’s changing. Under the IRS’s new DeFi broker tax regulations, front-end trading services–including websites, non-custodial wallets, and browser extensions that allow users to exchange digital assets–will be classified as “brokers”.
Note: non-custodial wallets that only store private keys (without facilitating trades) will not be classified as brokers.
As a result, starting January 2027, DeFi trading platforms must track and report customer transactions and file Form 1099-DA with the IRS. As part of these regulations, DeFi brokers will also be required to comply with Know Your Customer (KYC) procedures, similar to traditional financial institutions. This involves collecting and reporting user information, such as names, addresses, and transaction details, on Form 1099-DA.
While these platforms will be required to report gross earnings of your trades, they won’t report on cost basis–the original price you paid for an asset–information since they don’t hold custody of your assets. You will still need to use crypto tax software like Summ to track your cost basis.
The belief that crypto transactions are 'untraceable' and invisible to the IRS is a myth. The blockchain is a transparent ledger, open to anyone, making it a poor choice for evading taxes. It's the opposite of a hiding spot; it's a spotlight on every transaction you've ever made.
Crypto exchanges are also subject to Know Your Customer (KYC) requirements. Both domestic and international crypto exchanges collaborate with tax authorities around the world, and have data-sharing agreements, which means they must report your activities to the IRS. They keep detailed records of your transactions, making it easier for the IRS to follow the money trail, even if it's been through a mixer.
Finally, new rules announced in December 2024 by the U.S. Department of the Treasury and the IRS require crypto platforms to report digital asset transactions on Form 1099. Exchanges submit this form both to investors and to the IRS. In other words, even if you don’t report your income to the IRS, they likely already know about it.
In short, yes, the IRS likely knows about your crypto, or at least has the means to find out. The blockchain's transparency, combined with the IRS's growing tech-savviness and the reporting duties of exchanges, makes your crypto activities more visible than you might think. It's safer to assume the IRS is in the know and report your crypto transactions accordingly. Compliance is your best strategy when it comes to crypto tax.
A crypto mixer or tumbler is a service that combines multiple users’ cryptocurrencies together to hide their owner and origin, allowing anonymous transfers to occur.
The largest crypto mixer running on the Ethereum blockchain is Tornado Cash, which has been sanctioned by the U.S. Treasury for laundering over $7 billion of virtual currency since 2019.
People believe mixing their crypto can protect their privacy and even help them dodge taxes. The bad news is that it isn’t just you that knows about it. The IRS is aware of these platforms and has ways of dealing with this type of tax evasion. The founder of Tornado Cash was famously imprisoned as a result of a joint FBI-IRS investigation. Even if you use a mixer, authorities will still be able to see that you accessed the mixer in the first place – which may be illegal – and potentially trace your transactions.
The IRS has started auditing taxpayers specifically to evaluate their crypto trades. If you have made sure your tax reporting is compliant, then being audited is nothing to worry about. You are expected to disclose any addresses or wallets you own or control and any exchange accounts you have.
In addition, you have to provide some information about each individual transaction. This is where things can get a little trickier if transactions include DeFi activity, which is difficult to report without software like Summ.
You need to provide:
This is where software like Summ (formerly Crypto Tax Calculator) can help. Keeping track of all this information, especially in dollar terms, can be difficult for 10 transactions, let alone 100 or 1000. Summ automates this process for you and goes one step further by calculating the exact taxes you owe on all your trades.
{{irs-knows-your-crypto-cta1}}
Failing to report cryptocurrency transactions can lead to penalties, interest, and potential legal issues.
Here's what could happen and what you can do to rectify the situation.
Example:
You forgot to report $5,000 in crypto gains. The IRS discovers this through third-party reporting.
You could face:
If you reported some but not all of your crypto transactions – perhaps due to assets scattered across DeFi platforms and various exchanges – the IRS might question the incomplete information.
Example:
You reported trades from your main exchange but omitted transactions from a decentralized exchange (DEX). The IRS cross-references Form 1099s and notices missing income.
Proactively correcting your tax return can mitigate penalties if you come forward before the IRS contacts you.
Example:
Realizing you omitted $2,000 in staking rewards and $3,000 in DeFi gains, you:
If you don’t report your taxable DeFi transactions to the IRS, it could end up costing you a lot more in the long run. The IRS imposes an accuracy-related penalty if you don’t report all of your income and, therefore, underpay your taxes.
First, you could pay a negligence penalty if you don’t make a reasonable attempt to follow the tax laws when filing your income tax returns. Examples of this type of negligence include not keeping proper records and not reporting income that was shown on a tax form, such as Form 1099. According to the IRS, this penalty applies if your disregard for the tax rules is either careless, reckless, or intentional.
You could also pay a tax penalty for substantial understatement of tax. This applies if you understate your tax liability by 10% or more of your required tax or $5,000, whichever is greater. The penalty for both negligence and substantial understatement is 20% of the portion of the underpayment.
In addition to your tax penalty, you’ll also pay interest on both your underpayment and the penalty itself. Interest starts accruing on the date income taxes are due — usually April 15 — and continues accruing until you pay what you owe.
Where to Track Cryptocurrency Transactions, Bitstamp Learn, 2024
[Many Crypto Investors’ Transactions This Year Will Be Reported to the IRS for the First Time, CNN, 2025] (https://edition.cnn.com/2025/01/16/business/crypto-investors-third-party-tax-reporting-1099-irs/index.html
IRS Uses Chainalysis to Track Down Bitcoin Tax Cheats, Cointelegraph, 2017
Frequently Asked Questions on Virtual Currency Transactions, IRS, 2025
IRS delays implementing crypto cost-basis reporting rules, The Block, 2025
US: IRS And Treasury Impose New Tax Rules For Crypto DeFi Platforms, IFC, 2025
Understanding The New IRS DeFi Broker Tax Regulations, Forbes, 2024
Decentralized platforms may benefit from strict US crypto tax laws, CoinTelegraph, 2025
The information provided on this website is general in nature and is not tax, accounting or legal advice. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider the appropriateness of the information having regard to your own objectives, financial situation and needs and seek professional advice. Summ (formerly Crypto Tax Calculator) disclaims all and any guarantees, undertakings and warranties, expressed or implied, and is not liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or incidental or Consequential Loss or damage) arising out of, or in connection with, any use or reliance on the information or advice in this website. The user must accept sole responsibility associated with the use of the material on this site, irrespective of the purpose for which such use or results are applied. The information in this website is no substitute for specialist advice.
James Edwards has been active in the cryptocurrency industry for over 10 years. He is an avid user of DeFi and believes in the promise of a user-owned and operated web.
His expertise as a cryptocurrency journalist has seen him contribute to publications such as Nasdaq, CoinMarketCap and CoinTelegraph.
Are you someone who has unfortunately had crypto stolen or hacked, or maybe you just lost access to it? Learn the tax implications in our blog article.
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IRS Letters 6174, 6174-A, 6173, and CP2000 look scary at first, but there’s no need to panic – here's how to respond to each.
Compare the best platforms for managing Form 1099-DA reporting, calculating cost basis, and reconciling exchange data with your actual transaction history.
Coinbase Prime has started issuing Form 1099-DA to U.S. crypto traders for the first time. This quick guide explains what the new 1099-DA means, why you received it, what's missing from the form, and the exact steps you should take next to avoid overpaying on crypto tax.
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Without accurate cost basis information, your crypto tax calculations will be incorrect, which could cost you thousands in overpayment.
Import your transactions and generate a free report preview.
Blog
13 September 2020
X
Min read
These are the tactics the IRS uses to collect data, track crypto and match it to your identity. And what to do if you've get audited.
James Edwards
This tax guide is regularly updated: Last Update
....
October
1
2025
Whether you’re a long-term crypto holder or have recently started trading, you may wonder: does the IRS know about my crypto?
The short answer is: Yes, they do.
The days of flying under the radar as a crypto user are well and truly over.
In 2015, the IRS began working with blockchain analytics companies like Chainalysis to monitor blockchain transactions. Fast forward to today, and in 2025, new cryptocurrency tax regulations make it easier for the IRS to track your crypto trades.
Centralized exchanges – such as Coinbase and Binance – will be required to report user transactions, and you’ll be expected to include this on your 2025 tax return.
This will make it easier than ever for the IRS to link your real identity with your on-chain transactions, which are already publicly available and easy to link.
Let’s look at how the IRS tracks your crypto, how long it’s been monitoring cryptocurrency for, what you need to report, the penalties for non-compliance, and most importantly, what to do if you’re behind on your reporting or get audited. We also take a look at new rules that are set to be introduced between 2026-2030.
{{irs-knows-your-crypto-callout1}}
{{irs-knows-your-crypto-cta1}}
The IRS has significantly strengthened its ability to track cryptocurrency transactions with the introduction of Form 1099-DA in 2026, effective from the 2025 tax year. This new form represents the most comprehensive crypto reporting requirement to date.
Starting in 2026, the IRS will receive copies of every 1099-DA form issued by crypto brokers, giving them unprecedented visibility into your crypto trading activity. This includes:
The most critical issue is the mismatch between what brokers report and what you actually owe. In 2026, brokers will only report gross proceeds — not your cost basis. Your 1099-DA might show $50,000 in proceeds, but the IRS won't know you only made $5,000 in actual profit.
If you don't provide the IRS with the correct information, then you could massively overpay on your tax. For instance, if you had $50,000 of proceeds and a cost basis of zero, but only made $5,000 in actual profit, the IRS would expect you to pay tax on a 100% gain of $50,000, instead of a 10% gain of $5,000.
This is why checking your 1099-DA against your actual transaction history is so important. You can use software like Summ (formerly Crypto Tax Calculator) to reconcile your transaction history with your 1099-DA form, identify any inaccuracies or missing cost basis, and report the accurate figures on your Form 8949 to ensure you pay the correct amount of tax.
Without comprehensive tracking that software like Summ provides, you risk significant penalties if the IRS compares your tax return against multiple 1099-DA forms and finds discrepencies.
In 2025 new IRS regulations require brokers to report customer transactions, making it easier for tax authorities to track crypto activity.
These rules apply to brokers who “take possession of the digital assets being sold by their customers, including operators of custodial digital asset trading platforms, certain digital asset hosted wallet providers, digital asset kiosks and certain processors of digital asset payments (PDAPs),” according to the IRS.
This includes centralized crypto exchanges like Coinbase, stock trading platforms that sell crypto like eToro, and trading apps like Robinhood.
Starting January 1, 2025, brokers will begin tracking your transactions and reporting gross proceeds to the IRS. These transactions will be reported on Form-1099-DA, which will be sent to both users and the IRS in early 2026. By 2027 (for the 2026 tax year), brokers will start tracking and reporting your cost basis on the 1099DA, which means the IRS will have a thoroughly detailed view of your crypto ownership.
Similar to other 1099 forms used for reporting traditional investment income, information on Form 1099-DA will need to be added to your 2025 tax return. If you don’t include it, the IRS will notice as they already have the data, which will increase your chances of being audited.
These new regulations aim to “improve detection of noncompliance in the high-risk space of digital assets,” said IRS Commissioner Danny Werfel.
Transactions reported to the IRS include withdrawals to wallets, which means that the IRS is aware of your on-chain trading activity.
Contrary to what many people think, DeFi transactions and trading are taxable events that must be reported on your tax return. Failure to report could result in serious fines or penalties.
Since the 2020 tax season, every taxpayer has been required to answer a crypto-specific question on Form 1040: At any time during the year did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?
This broad question means that you’ve interacted with crypto in any way – even if you just held bitcoin – you would need to answer “yes.” The IRS introduced this question to track your crypto activity over time, ensuring they can monitor future transactions when you eventually sell.
Following the 2021 Build Back Better Act, crypto exchanges began issuing 1099-K and 1099-B forms to users in 2023. These forms were sent to traders–and then the IRS–who had more than $20,000 in proceeds and 200 or more transactions on an exchange. If you received one of these tax forms, the IRS is already aware of some of your crypto trades.
Even though during this time crypto taxes operated on a voluntary system, you were supposed to volunteer information about your trades and how much you owe.
However, the IRS identified cryptocurrency as one five problem areas where taxpayers could evade taxes and began criminal proceedings against tax avoiders. If you received a letter from the IRS stating you are under investigation, you were generally no longer eligible to voluntarily declare back-taxes and faced potentially reduced penalties.
Back in 2014, the US government declared all forms of digital currency as property, meaning when it was sold it was subject to tax. While crypto was originally envisioned as an alternative to government-issued currency, this ruling first signalled that regulators were interested in making some money from it.
By 2015, records indicate that the IRS had begun collaborating with blockchain technology companies, placing an order for work with Chainalysis in August of that year.
In December 2016, the IRS issued a summons to Coinbase, demanding records for over 500,000 customers who had traded crypto in previous years. Initially, Coinbase was required to provide user details for anyone with a single transaction–deposit or withdrawal–larger than $20,000.
The information Coinbase was required to provide included:
With access to this information, the IRS had a clear path to identifying who owed them money, and could estimate the amount owed in many cases.
In terms of accounting,cost basis reporting rules will come into effect in 2026. Your cost basis is the total amount you paid for a crypto asset, plus any transaction fees.
Initially scheduled for 2025, the new tax reporting rules require centralized crypto exchanges to change to the First In, First Out (FIFO) method of calculating capital gains unless otherwise specified by the user. FIFO considers the earliest bought crypto assets are sold first, which could result in higher capital gains taxes during market fluctuations.
These changes will require you to identify the cost basis of your assets for each individual wallet or exchange account. You must take action by 31 December 2025 to ensure compliance by 2026.
{{irs-knows-your-crypto-cta2}}
Starting in 2027, certain digital brokers will be required to issue Form 1099-DA to taxpayers, reporting crypto asset proceeds from broker transactions to both users and the IRS.
For years, DeFi protocols have been operating in a grey regulatory environment, but that’s changing. Under the IRS’s new DeFi broker tax regulations, front-end trading services–including websites, non-custodial wallets, and browser extensions that allow users to exchange digital assets–will be classified as “brokers”.
Note: non-custodial wallets that only store private keys (without facilitating trades) will not be classified as brokers.
As a result, starting January 2027, DeFi trading platforms must track and report customer transactions and file Form 1099-DA with the IRS. As part of these regulations, DeFi brokers will also be required to comply with Know Your Customer (KYC) procedures, similar to traditional financial institutions. This involves collecting and reporting user information, such as names, addresses, and transaction details, on Form 1099-DA.
While these platforms will be required to report gross earnings of your trades, they won’t report on cost basis–the original price you paid for an asset–information since they don’t hold custody of your assets. You will still need to use crypto tax software like Summ to track your cost basis.
The belief that crypto transactions are 'untraceable' and invisible to the IRS is a myth. The blockchain is a transparent ledger, open to anyone, making it a poor choice for evading taxes. It's the opposite of a hiding spot; it's a spotlight on every transaction you've ever made.
Crypto exchanges are also subject to Know Your Customer (KYC) requirements. Both domestic and international crypto exchanges collaborate with tax authorities around the world, and have data-sharing agreements, which means they must report your activities to the IRS. They keep detailed records of your transactions, making it easier for the IRS to follow the money trail, even if it's been through a mixer.
Finally, new rules announced in December 2024 by the U.S. Department of the Treasury and the IRS require crypto platforms to report digital asset transactions on Form 1099. Exchanges submit this form both to investors and to the IRS. In other words, even if you don’t report your income to the IRS, they likely already know about it.
In short, yes, the IRS likely knows about your crypto, or at least has the means to find out. The blockchain's transparency, combined with the IRS's growing tech-savviness and the reporting duties of exchanges, makes your crypto activities more visible than you might think. It's safer to assume the IRS is in the know and report your crypto transactions accordingly. Compliance is your best strategy when it comes to crypto tax.
A crypto mixer or tumbler is a service that combines multiple users’ cryptocurrencies together to hide their owner and origin, allowing anonymous transfers to occur.
The largest crypto mixer running on the Ethereum blockchain is Tornado Cash, which has been sanctioned by the U.S. Treasury for laundering over $7 billion of virtual currency since 2019.
People believe mixing their crypto can protect their privacy and even help them dodge taxes. The bad news is that it isn’t just you that knows about it. The IRS is aware of these platforms and has ways of dealing with this type of tax evasion. The founder of Tornado Cash was famously imprisoned as a result of a joint FBI-IRS investigation. Even if you use a mixer, authorities will still be able to see that you accessed the mixer in the first place – which may be illegal – and potentially trace your transactions.
The IRS has started auditing taxpayers specifically to evaluate their crypto trades. If you have made sure your tax reporting is compliant, then being audited is nothing to worry about. You are expected to disclose any addresses or wallets you own or control and any exchange accounts you have.
In addition, you have to provide some information about each individual transaction. This is where things can get a little trickier if transactions include DeFi activity, which is difficult to report without software like Summ.
You need to provide:
This is where software like Summ (formerly Crypto Tax Calculator) can help. Keeping track of all this information, especially in dollar terms, can be difficult for 10 transactions, let alone 100 or 1000. Summ automates this process for you and goes one step further by calculating the exact taxes you owe on all your trades.
{{irs-knows-your-crypto-cta1}}
Failing to report cryptocurrency transactions can lead to penalties, interest, and potential legal issues.
Here's what could happen and what you can do to rectify the situation.
Example:
You forgot to report $5,000 in crypto gains. The IRS discovers this through third-party reporting.
You could face:
If you reported some but not all of your crypto transactions – perhaps due to assets scattered across DeFi platforms and various exchanges – the IRS might question the incomplete information.
Example:
You reported trades from your main exchange but omitted transactions from a decentralized exchange (DEX). The IRS cross-references Form 1099s and notices missing income.
Proactively correcting your tax return can mitigate penalties if you come forward before the IRS contacts you.
Example:
Realizing you omitted $2,000 in staking rewards and $3,000 in DeFi gains, you:
If you don’t report your taxable DeFi transactions to the IRS, it could end up costing you a lot more in the long run. The IRS imposes an accuracy-related penalty if you don’t report all of your income and, therefore, underpay your taxes.
First, you could pay a negligence penalty if you don’t make a reasonable attempt to follow the tax laws when filing your income tax returns. Examples of this type of negligence include not keeping proper records and not reporting income that was shown on a tax form, such as Form 1099. According to the IRS, this penalty applies if your disregard for the tax rules is either careless, reckless, or intentional.
You could also pay a tax penalty for substantial understatement of tax. This applies if you understate your tax liability by 10% or more of your required tax or $5,000, whichever is greater. The penalty for both negligence and substantial understatement is 20% of the portion of the underpayment.
In addition to your tax penalty, you’ll also pay interest on both your underpayment and the penalty itself. Interest starts accruing on the date income taxes are due — usually April 15 — and continues accruing until you pay what you owe.
Where to Track Cryptocurrency Transactions, Bitstamp Learn, 2024
[Many Crypto Investors’ Transactions This Year Will Be Reported to the IRS for the First Time, CNN, 2025] (https://edition.cnn.com/2025/01/16/business/crypto-investors-third-party-tax-reporting-1099-irs/index.html
IRS Uses Chainalysis to Track Down Bitcoin Tax Cheats, Cointelegraph, 2017
Frequently Asked Questions on Virtual Currency Transactions, IRS, 2025
IRS delays implementing crypto cost-basis reporting rules, The Block, 2025
US: IRS And Treasury Impose New Tax Rules For Crypto DeFi Platforms, IFC, 2025
Understanding The New IRS DeFi Broker Tax Regulations, Forbes, 2024
Decentralized platforms may benefit from strict US crypto tax laws, CoinTelegraph, 2025
The way cryptocurrencies are taxed in most countries mean that investors might still need to pay tax, regardless of whether they made an overall profit or loss. Depending on your circumstances, taxes are usually realized at the time of the transaction, and not on the overall position at the end of the financial year.
In most countries you are required to record the value of the cryptocurrency in your local currency at the time of the transaction. This can be extremely time consuming to do by hand, since most exchange records do not have a reference price point, and records between exchanges are not easily compatible.
You just need to import your transaction history and Summ (formerly Crypto Tax Calculator) will help you categorize your transactions and calculate realized profit and income. You can then generate the appropriate reports to send to your accountant and keep detailed records handy for audit purposes.
We always recommend you work with your accountant to review your records. If you would like your accountant to help reconcile transactions, you can invite them to the product and collaborate within the Summ web app. We also have a complete accountant suite aimed at accountants.
Summ (formerly Crypto Tax Calculator) handles all non-exchange activity, such as onchain transactions like Airdrops, Staking, Mining, ICOs, and other DeFi activity. No matter what activity you have done in crypto, we have you covered with our easy to use categorization feature, similar to Expensify.
Our subscription pricing is per year not tax year, so with an annual subscription you can calculate your crypto taxes as far back as 2013. The process is the same, just upload your transaction history from these years and we can handle the rest.
Yes, Summ is designed to generate accountant-friendly tax reports. You simply import all your transaction history and export your report. This means you can get your books up to date yourself, allowing you to save significant time, and reduce the bill charged by your accountant. You can discuss tax scenarios with your accountant, and have them review the report.
Summ has an annual subscription which covers all previous tax years. If you need to amend your tax return for previous years you will be covered under the one payment.
Summ covers thousands of exchanges, wallets, and blockchains, and DeFi apps, but if you do not see your exchange on the supported list we are more than happy to work with you to get it supported. Just reach out to [email protected] or via the in-app chat support feature and we will get you sorted.
We do! Summ integrates with many NFT marketplaces and offers categorization options for any NFT-related activity (minting, buying, selling, trading).
Summ is free to use immediately upon signup, allowing you to import your transactions and take advantage of our smart suggestion and auto-categorization engine, portfolio tracking, DeFi and NFT support. For access to reports, the tax loss harvest tool or chat and priority support, you will need to upgrade to the appropriate paid plan.
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