Written by: Olga Kharif

Translated by: Saoirse, Foresight News

The IRS building in Washington, D.C. Photographer: Eric Lee / Bloomberg

Tyler Menzer stated that to gain a deeper understanding of the situation of cryptocurrency investors, he has been analyzing IRS data for several years, ultimately concluding that these investors may be intentionally evading taxes.

It is like a popular internet meme from a few years ago — the late Arizona Cardinals coach Dennis Green famously said when discussing a winning opponent, “They are who we thought they were,” and when it comes to Uncle Sam's tax obligations, the typical cryptocurrency player is much the same. (Meaning, indeed we were not mistaken, cryptocurrency players do not want to pay taxes to the IRS.)

Tyler Menzer is an assistant professor in the Department of Accounting at the Neely School of Business at Texas Christian University, with access to millions of anonymous taxpayer data provided by the IRS for research. He and his co-authors of a recent study found that, at least from 2013 to 2021, very few taxpayers reported cryptocurrency transactions on their tax returns; even when they did report, 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 tend to be younger and may have lower incomes. The core conclusion of our paper is that this is a distinctly characterized group of taxpayers and investors. Their trading behavior may differ, and their compliance may also differ. Many likely have not reported their crypto assets to the IRS.”

The IRS building in Washington, D.C. Photographer: Samuel Colem / Bloomberg

Other surveys and studies show that by 2021, about 12% to 21% of American adults had owned cryptocurrency, but Menzer and his team found that only 6.5% of individuals reported cryptocurrency transactions to the IRS. The time frame of this study predates the point in early 2024 when U.S. ETFs were allowed to hold physical cryptocurrencies, a policy that has since completely reshaped the overall investor landscape.

The paper titled “Who Will Report Cryptocurrency to the IRS?” was co-authored by Jeffrey Hoopes, a professor at the University of North Carolina at Chapel Hill, Tyler Menzer, and Jaron Wilde, a professor of accounting at the University of Iowa, and published in March this year in the accounting research journal under Springer Nature. The research mainly focuses on the trading conditions of Bitcoin and Ethereum.

The IRS did not immediately respond to this.

Data from CoinTracker, a cryptocurrency investment tracking and tax compliance software company, shows that in 2025, accounts holding digital assets for less than a year suffered an average loss of $636; trades of assets held for over a year averaged a profit of $2,692. In the 2025 tax year, cryptocurrency investors averaged 836 transactions that needed to be reported for tax purposes.

Cryptocurrency traders often completely disregard tax implications when selling holdings, a phenomenon Menzer attributes to a lack of investor sophistication, as well as the inherent high volatility of crypto assets. The market bellwether Bitcoin has dropped about 40% since hitting an all-time high in October. In contrast, many traditional stock investors deliberately choose the timing of their sales to take advantage of lower tax rates.

However, this situation is set to change soon. The IRS has tightened reporting requirements for the 2026 tax year, pushing cryptocurrency regulation closer to stock market standards. U.S. exchanges like Coinbase are required to issue transaction forms, and taxpayers must honestly report whether they hold cryptocurrencies, regardless of whether they receive the new 1099-DA form. Relevant rules targeting wash sales and other compliance loopholes are also under review.

Whether the libertarian anti-tax philosophy that has been prevalent in the cryptocurrency space since its inception can be sustained remains to be seen, especially with tax day approaching.