Can the IRS Track Crypto? (2026 Update)

Wondering if your Bitcoin transactions are traceable by the IRS, and what the IRS knows about your crypto? In this guide, we're looking at whether the IRS can track cryptocurrencies, how the IRS tracks crypto, which crypto exchanges report to the IRS, which crypto exchanges don't report to the IRS, and more.

Is Bitcoin traceable?

Yes, Bitcoin is traceable. Every single Bitcoin transaction, including wallet addresses, is recorded on a public, distributed ledger. Anyone can view this ledger, including any interested tax office, like the IRS.

How is cryptocurrency traceable?

One of the key tenets of blockchain tech is transparency, which is why the vast majority of blockchains (excluding privacy chains like Monero) are on public ledgers. Every transaction is recorded permanently.

Anyone can look up a wallet or a transaction using a blockchain explorer. Crypto is often marketed as anonymous and decentralized, but complete anonymity is rare. While a wallet address doesn't include your name or other personal details, centralized crypto exchanges are under pressure to collect and share customer data. This makes linking your identity to a wallet much easier than many investors assume.

How does the IRS track crypto?

Through a combination of data from crypto exchanges and working with blockchain analytical companies like Chainalysis. In brief:

• All crypto exchanges (legally operating) must have KYC verification for customers and report user transactions to the IRS via 1099-DA and 1099-MISC

• This data is used to identify anyone failing to report crypto transactions

• Exchanges may share other information on request, including wallet addresses

• The IRS increased its budget and hired dedicated agents to target crypto tax evaders

• The IRS has worked with Chainalysis to identify tax evaders

Do crypto exchanges report to the IRS?

Yes. Crypto exchanges report to the IRS, through 1099 forms, as well as providing other information upon request.

The IRS launched 'Operation Hidden Treasure' back in 2021, which is a partnership between the Civil Office of Fraud Enforcement and the IRS, with a specialized team trained in virtual currency tracking to root out tax evaders.

Throughout the last few years, the IRS has also utilized John Doe summons to compel exchanges, including Coinbase, Kraken, and Poloniex, to share user data.

Which crypto exchanges report to the IRS?

There's no definitive list, but any crypto exchange lawfully operating in the US shares information with the IRS. The extent of that information isn't public knowledge, but crypto exchanges sending out 1099 forms (to you and the IRS) include:

• Coinbase

• Binance US

• Gemini

• Kraken

• Bitstamp

• eToro

• Crypto.com

• Uphold

• Robinhood Crypto

• PayPal Crypto

When do crypto exchanges report to the IRS?

Exchanges generally issue 1099 forms in January or February following the end of the financial year.

Which crypto exchanges do not report to the IRS?

There are an increasingly small number of exchanges that do not report to the IRS, including:

• Bisq

• Hodl hold

• ProBit

There's a catch, though; the majority of no KYC crypto exchanges limit the transactions you can make or the locations you can access them from. Many former popular exchanges like KuCoin and MEXC have withdrawn services to US investors. While you may still be able to access a given platform, those in restricted locations can have their accounts and funds frozen at any time.

Can I be linked to a wallet address?

Non-custodial wallets aren't fully untraceable. Despite many users presuming anonymity, you can still be linked to a wallet in several ways:

• Some wallets let you buy crypto with a credit or debit card. This is convenient, but it ties your bank account to the wallet. Banks must share information with the IRS, so these purchases can reveal your activity.

• If you move crypto between your non-custodial wallet and a centralized exchange that reports to the IRS, your wallet address may be included in that data.

• Wallets may collect more information than expected. For example, MetaMask’s updated privacy policy allows tracking of user IP addresses and Ethereum addresses during transactions.

Because of these factors, staying completely anonymous is increasingly difficult. The safest approach is simply to report your crypto activity accurately.

What do I need to report about crypto to the IRS?

The IRS wants a lot of information about your crypto assets, including:

• The date of each transaction

• Your cost basis or the fair market value of your crypto in USD on the day you acquired it

• The fair market value of your crypto in USD on the day you disposed of it

• The capital gain or loss you made from each transaction

• What the transaction was and the parties involved

• Receipts of purchase and sale

• Records of transfers and transactions from all your crypto wallets and exchanges

You need to report all this on Form 8949 and Schedule D, as well as any crypto income on Schedule 1 as part of your annual tax return, by April 15 each year. Learn more about crypto taxes in our guide

How does the IRS verify cost basis?

Falsifying your cost basis to decrease your tax bill is tax evasion. The IRS can refer to your previous tax returns and records from exchanges to identify discrepancies.

The usual statute of limitations for an IRS audit is three years, but for overstating cost basis by 25% or more, the IRS has 6 years to audit those tax returns.

I forgot to report cryptocurrency on taxes, what do I do?

Whether you forgot or you “forgot", if the IRS believes you've committed tax fraud, there's no limit as to how far back they can audit you.

The best thing you can do is amend your tax return for the years you forgot to report crypto using IRS Form 1040X. You have three years from the date you originally filed to file an amended return. The IRS is far more likely to be lenient to those who make the effort to go back and correct their taxes.

If you've deliberately underreported or avoided reporting crypto on your taxes altogether, the IRS just updated Form 14457 to include a section on reporting virtual currency. This is a voluntary disclosure application that allows taxpayers who may be facing criminal prosecution for violation of tax laws to voluntarily disclose information.

How a crypto tax calculator can help

We get it. Crypto taxes are time-consuming; that’s why we made a crypto tax calculator. We make it easy to get your crypto taxes done in no time at all and ensure you remain tax compliant.

All you need to do with Koinly is sync all the crypto exchanges, wallets, and blockchains you use using API or by importing a CSV file of your transaction history. Once you’ve done that, Koinly will calculate your capital gains, losses, income, expenses, and more and fetch your crypto tax report, ready for you to download.

For US investors, Koinly can generate a pre-filled Form 8949 and Schedule D, the Complete Tax Report (for crypto income), and a variety of tax reports for tax apps like TurboTax and TaxAct.