An IRS study of 1.3 billion tax returns has revealed that approximately 92.5% of Americans do not report their cryptocurrency sales, according to ourcryptotalk.com.
The research paper, titled “Who Reports Cryptocurrency to the IRS?”, was authored by IRS SOI Division researchers Jeffrey Hoquette, Tyler Menzer, and Jaron Wilde. Analyzing data from 2013 to 2021, the study found that only 17.4 million individuals—roughly 6.5% of the observed taxpayers—reported crypto sales during that period.
While the number of returns including crypto sales grew to 6.5 million by 2021, the figure remains a fraction of the total market. Independent surveys estimate between 31 million and 54 million Americans currently own cryptocurrency, meaning only about 32% to 56% of actual owners appear to be reporting their holdings.
The growing tax gap
The IRS estimates that unreported digital assets cost the agency more than $50 billion in lost revenue annually. This loss contributes to a broader annual federal tax gap estimated at $688 billion.
According to ourcryptotalk.com, the profile of those who do report their taxes tends to be younger, with the average age of reporters dropping to approximately 34 by 2021. These taxpayers typically earn less taxable income than the general population and exhibit retail-style trading patterns.
Reporting levels saw a notable spike after the IRS introduced a virtual currency checkbox on Form 1040 in 2019. The study noted that self-prepared returns showed the largest increase in compliance following this change.
New regulatory measures are expected to tighten this gap. Starting this tax year, new Form 1099-DA rules require brokers to report gross proceeds from crypto sales directly to the IRS. This shift toward automatic data matching aims to close the information gap that previously allowed widespread underreporting.
