3 CRYPTO TRAPS That Get You Audited!

By Adarsha Dhakal

December 14, 2025

The IRS is Watching

The IRS is now using AI and advanced tracking tools to identify cryptocurrency tax reporting errors. Mistakes mean audits.

Forgetting Mining/Staking Income

All crypto earned via staking rewards or mining is considered ordinary income when you receive it. You must report its USD value immediately.

"Trading" One Crypto for Another

Trading Bitcoin (BTC) for Ethereum (ETH) is considered a taxable event—not a tax-free exchange. This is the #1 most missed item.

Not Tracking NFTs

Selling an NFT is considered selling a collectible. The tax rate is often higher (up to 28%) than the normal capital gains tax rate.

Use a Dedicated Tax Software

FIX: Do not use spreadsheets. Use crypto-specific tax software like TaxBit or CoinLedger to generate the required tax forms (8949).

Wash Sale Rule DOES NOT Apply

The tax "Wash Sale" loophole used in stock trading does not apply to crypto. Selling a coin at a loss and buying it back immediately is safe.

AVOID AUDITS. ACT NOW.

Swipe Up for the full Investozora guide: “Should You Invest In Crypto? Its Risk and Benefits.”