Written by: Olga Kharif
Compiled by: Saoirse, Foresight News
The Internal Revenue Service building in Washington, D.C. Photographer: Eric Lee / Bloomberg
Tyler Menzer says that to gain a deeper understanding of the situation of cryptocurrency investors, he has been sifting through IRS data for several years and has concluded that these investors may be deliberately evading taxes.
Just like a widely circulated internet meme from a few years ago—the late Arizona Cardinals coach Dennis Green once angrily said about a winning opponent, "They are who we thought they were!"—when it comes to fulfilling tax obligations to Uncle Sam, the typical cryptocurrency player is probably the same. (Meaning, as expected, cryptocurrency players don't want to pay taxes to the IRS.)
Tyler Menzer is an assistant professor in the accounting department at the Neely School of Business at Texas Christian University and has access to millions of anonymous taxpayer data provided by the IRS for research. He and his co-authors of a recently published study found that, at least from 2013 to 2021, very few taxpayers reported cryptocurrency transactions on their tax returns; even when they did, this group was significantly different from traditional stock investors.
"Cryptocurrency holders are more likely to hold meme stocks than other investors," Menzer said in an interview. "They are younger and likely have lower incomes. The core conclusion of our paper is that this is a distinct group of taxpayers and investors. Their trading methods are different, and their compliance performance may also be different. Many are probably not reporting their crypto assets to the IRS."
The Internal Revenue Service building in Washington, D.C. Photographer: Samuel Corum / Bloomberg
Other surveys and studies show that by 2021, about 12% to 21% of U.S. adults had held cryptocurrency, but Menzer and his team found that only 6.5% had reported cryptocurrency transactions to the IRS. The study's timeframe predates the approval of U.S. ETFs to hold physical cryptocurrencies in early 2024, a policy that has since completely reshaped the overall investor landscape.
The paper, titled "Who Reports Cryptocurrency to the IRS?", was co-authored by University of North Carolina at Chapel Hill professor Jeffrey Hoopes, Tyler Menzer, and University of Iowa accounting professor Jaron Wilde. It was published in March of this year in the accounting research journal under Springer Nature. The research primarily focused on Bitcoin and Ethereum transactions.
The IRS did not immediately respond to a request for comment.
Data from cryptocurrency investment tracking and tax compliance software company CoinTracker shows that in 2025, digital asset accounts held for less than one year averaged a loss of $636; transactions for assets held for more than one year averaged a profit of $2,692. In the 2025 tax year, cryptocurrency investors averaged 836 transactions that required tax reporting.
Cryptocurrency traders also often sell their holdings without considering the tax implications at all, a phenomenon Menzer attributes to a lack of investor sophistication and the high volatility of crypto assets themselves. The market bellwether Bitcoin has fallen about 40% since hitting an all-time high in October. Many traditional stock investors, however, deliberately time their sales to qualify for lower tax rates.
However, this situation is about to change soon. The IRS has tightened reporting requirements for the 2026 tax year, moving cryptocurrency regulation closer to the stock market system. U.S. exchanges like Coinbase are required to issue transaction forms, and taxpayers must truthfully report whether they hold cryptocurrency, regardless of whether they receive the new Form 1099-DA. Rules regarding wash sales and other compliance loopholes are also under review.
style="text-align: start;">Whether the libertarian anti-tax sentiment that has prevailed in the crypto space since its inception can persist remains to be seen, especially as tax day approaches.
