For years, cryptocurrency holdings of U.S. taxpayers have existed in a sort of reporting gray zone. But now, those crypto wallets are getting a whole lot of attention from the Internal Revenue Service and President Biden, who appear determined to crack down on tax cheats.
The timing makes sense.
The president needs to raise money, relatively quickly, for his own ambitious economic agenda. And the “tax gap,” which is the difference between taxes paid and taxes owed, is a big pool of cash ripe for the picking. IRS chief Charles Rettig says the country is losing about a trillion dollars every year in unpaid taxes, and he credits this growing tax gap, at least in part, to the rise of the crypto market.
The federal government is so convinced of the potential for income from back-due taxes that the White House wants to give the IRS an extra $80 billion and new powers to crack down on tax dodgers, including those parking their cash in crypto.
“The IRS is in the business of collecting revenue,” said Shehan Chandrasekera, CPA, and head of tax strategy at CoinTracker.io, a crypto tax software company.
“Historically, if they spend $1 for any type of enforcement activity, they make $5…I think crypto enforcement activities are even higher than that,” he said.
Non-compliance made easy
In the U.S., it is easy to be an unintentional crypto tax cheat.
For one, the IRS hasn’t exactly made it easy to report this information.
Tax year 2019 was the first time the IRS explicitly asked taxpayers whether they had dealt in crypto. A question on form Schedule 1 read, “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”
But experts said the question was vague, and crucially, not everyone files this specific document. A Schedule 1 is typically used to report income not listed on the Form 1040, such as capital gains, alimony, or gambling winnings.
So in 2020, the IRS upped its game by moving the virtual currency question to the 1040 itself, which is used by all individuals filing an annual income tax return.
“[They put it] right after your name and social security number, and before you put any income numbers or deduction numbers in,” explained Lewis Taub, CPA and director of tax services at Berkowitz Pollack Brant. This made the question virtually impossible to miss.
But perhaps the bigger issue, according to Shehan, is that many filers have no clue how to calculate their crypto capital gains and losses.
If you trade through a brokerage, you typically get a Form 1099-B spelling out your transaction proceeds, streamlining the reporting process.
That doesn’t happen in the crypto world, Shehan said. “Many crypto exchanges don’t report any information to the IRS.”
While some crypto exchanges have begun to issue a tax form known as the 1099-K – which is traditionally given to an individual who engages in at least 200 transactions worth an aggregate $20,000 or more – in the context of crypto, this form only reports the total value of transactions. The total value does not factor in how much the person paid for the cryptocurrency in the first place, something referred to as the “cost basis,” which makes it hard to calculate the taxable gain.
“A lot of people have actually over-reported their income, because they got confused,” explained Shehan.
But the biggest issue driving non-compliance is the fact that the tax rules surrounding digital currencies are still being worked out, and in a state of constant flux.
‘Taxable event’
The IRS treats virtual currencies like bitcoin as property, meaning that it is taxed in a manner similar to stocks or real property. If you buy one bitcoin for $10,000 and sell it for $50,000, you face $40,000 of taxable capital gains. While this concept is relatively simple, it isn’t always clear what constitutes a “taxable event.”
Is buying dogecoin with your bitcoin a taxable event? Purchasing a TV with your dogecoin? Buyingan NFT with ether?
All of the above are technically taxable events.
“The government says if I buy something with crypto, it is as if I liquidated my crypto no differently than if I sold any other property,” said Taub.
Mining dogecoin for fun qualifies as self-employment income in the eyes of the government. According to cryptocurrency tax software TaxBit – which recently contracted with the IRS to aid the agency in digital currency-related audits – tax rates vary between 10-37% on mining proceeds.
“Crypto miners have to pay taxes on the fair market value of the mined coins at the time of receipt,” wrote crypto tax attorney Justin Woodward. While there are ways to get creative to minimize this tax burden, such as classifying mining as a business and deducting equipment and electricity expenses, it takes a bit of filing acrobatics to make it work.
Earning interest on the bitcoin sitting idle in your crypto wallet also counts as income and is taxed as such. Exchanges like Coinbase have also begun to send Form 1099-MISC to taxpayers who earned $600 or more on crypto rewards or staking.
The IRS crypto crackdown
Crypto trading volume may have fallen off a cliff in the last few weeks, but the overall market value of digital currencies is still up about 75% this year. The IRS has made it clear that it wants a piece of the action.
The agency recently ramped up efforts to subpoena centralized crypto exchanges for information about noncompliant U.S. taxpayers.
This spring, courts authorized the IRS to issue John Doe summonses to crypto exchange operators Kraken and Circle as a way to find individuals who conducted at least $20,000 of transactions in cryptocurrency from 2016 to 2020.
The IRS also put this same type of summons to use in 2016, when it went after Coinbase crypto transactions from 2013 to 2015.
Issuing these summons one exchange at a time is a clumsy way to capture noncompliant U.S. taxpayers, but it can be effective, according to Jon Feldhammer, a partner at law firm Baker Botts and a former IRS senior litigator.
Rettig said in a statement that taxpayers should take the letter “very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties.”
Sample Letter 6173
IRS
According to Shehan, the infamous “Letter 6173” gave individuals 30 days to respond to the IRS, otherwise they risked having their tax profile examined. Letters went out again in 2020, and a fresh round of these stern warnings are expected to be sent this autumn.
Even the threat of a letter has a lot of people seeking the counsel of accountants as to whether they should get ahead of a potential audit and be proactive about amending past returns.
“A lot of people ask me on Twitter: ‘Oh my god, in 2018, I had $200 worth of capital gains I didn’t report. What should I do?'” recounted Shehan. “In that case, it just is not worth amending the return to pick up $200 worth of income…The high-level thing is that if you didn’t do anything intentionally, you are fine.”
The IRS is also getting smarter about uncovering crypto tax evaders with the help of new data analytic tools it can employ in-house.
The agency’s partnership with TaxBit is a part of this effort. Taub describes the software as being able to go through cryptocurrency wallets and analyze them to figure out what was bought and sold in crypto. In addition to enlisting the services of the vendor itself, Taub says that IRS agents are being trained up on the software as a way to identify tax dodgers.
Biden’s new crypto rules
The president’s 2022 budget proposal could lead to a raft of new crypto reporting requirements for those dealing in digital coins.
The U.S. Treasury Department’s new “Greenbook,” released in May, calls for more comprehensive reporting requirements for crypto, so it’s as hard to spend digital currencies without getting reported as it is to spend cash today.
One proposal would require businesses to report to the IRS all cryptocurrency transactions valued at more than $10,000. Another calls for crypto asset exchanges and custodians to report data on user accounts which conduct at least $600 worth of gross inflows or outflows in a given year.
Another potential major blow to crypto holders: Biden’s proposal to raise the top tax rate on long-term capital gains to 43.4%, up from 23.8%.
“Crypto gains are being taxed as any other type of gain in assets, either at long-term capital gains or ordinary rates. President Biden has proposed to eliminate the difference between the two,” said David Lesperance, a Toronto-based attorney who specializes in relocating the rich.
Lesperance told CNBC the proposal would also function retroactively and apply to any transactions which took place after April 28, 2020.
“This translates into $19,800 in increased capital gains tax for each $100,000 in capital appreciation of crypto,” he said.
Amid the rising crypto crackdown here in the U.S., Lesperance has helped clients to expatriate in order to ditch their tax burden altogether.
“By exercising a properly executed expatriation strategy, the first $750,000 in capital appreciation is tax-free and the individual can organize themselves to pay no U.S. tax at all in the future,” he said.
But Lesperance warned that taxpayers need to move fast. “The runway to execute this strategy is very short,” he said.
A SpaceX Starship is seen in Boca Chica, Texas in 2023.
Patrick T. Fallon | Afp | Getty Images
A SpaceX Starship rocket on Wednesday exploded at the Starbase facility in Texas during routine testing in preparation for a launch flight, according to local authorities and live stream footage.
The rocket “experienced a major anomaly while on a test stand at Starbase” at 11 p.m. local time, SpaceX said on social media, noting “a safety clear area around the site was maintained throughout the operation and all personnel are safe and accounted for.”
Local authorities said that Starship “suffered a catastrophic failure and exploded,” with no injuries reported at the time of writing and an investigation is now underway. Live stream footage of Starbase showed the rocket burst into flame, shooting a large fireball into the sky.
Another Starship launch was expected to take place by the end of this month.
It’s been a tempestuous ride for Elon Musk’s mammoth Starship, after three flight launch attempts devolved in fiery glory and air-traffic stopping debris this year to date. Notably, the rocket model has taken off successfully in previous instances, but its vast scale — standing 120 meters (394 feet) tall when factoring in the Super Heavy booster — has raised concerns over its overall reliability and requirements for orbital refueling once in flight.
Yet Musk has clinched his hopes on Starship as the key vehicle for both NASA’s third and fourth Artemis missions — part of a broader plan to return humans to the Moon — due to take place over 2027-2028. The rocket is also set to play a role in launching the Starlab private space station in the transition to commercial space orbiting labs once the International Space Station retires after 2030.
Critically, Starship is also central to Musk’s — and former ally U.S. President Donald Trump’s — broader ambitions to colonize Mars. The rocket is set to ferry Optimus robots to the red planet by the end of 2026, with Musk in March saying, “If those landings go well, then human landings may start as soon as 2029, although 2031 is more likely.”
People look at iPhones at the Apple Fifth Avenue store in New York City on May 23, 2025.
Adam Gray | Reuters
Apple has plans to make a folding iPhone starting next year, reliable analyst Ming-Chi Kuo said on Wednesday.
Kuo said Apple’s folding phone could have a display made by Samsung Display, which is planning to produce as many as eight million foldable panels for the device next year. However, other components haven’t been finalized, including the device’s hinge, Kuo wrote. He expects it to have “premium pricing.”
Kuo is an analyst for TF International Securities, and focuses on the Asian electronics supply chain and often discusses Apple products before they’re launched.
He wrote in a post on social media site X that Apple’s plans for the foldable iPhone aren’t locked in yet and are subject to change. Apple did not respond to CNBC’s request for comment.
Apple’s iPhone makes up over half of Apple’s business and remains an incredibly profitable product, accounting for $201 billion in sales in the company’s fiscal 2024. But iPhone revenue peaked in 2022, and Apple is constantly looking for ways to attract new customers and convince its current customers to upgrade to more expensive devices.
The Flex S is another concept device Samsung showed off at MWC. It folds in a more zigzag-like way to make an “S” shape.
Ryan Browne | CNBC
Several of Apple’s rivals, including Huawei and Samsung, have been releasing folding smartphones since 2019.
The devices promise the screen size of a tablet in a format that can be stored in pants pockets. But folding phones still have hardware issues, including creases in the display where it is folded.
Folding phones also have yet to prove they drive significant demand after the novelty wears off.
Research firm TrendForce said last year that only 1.5% of all smartphones sold can fold. Counterpoint, another research firm tracking smartphone sales, said earlier this year that the folding market only grew about 3% in 2024 and is expected to shrink in 2025.
FILE PHOTO: Jason Droege speaks at the WSJTECH live conference in Laguna Beach, California, U.S. October 22, 2019.
Mike Blake | Reuters
Scale AI’s Interim CEO Jason Droege said in a memo on Wednesday that the artificial intelligence startup is not changing course following Meta’s multibillion-dollar investment in the company last week.
“Unlike some other recent tech deals you might have heard about in the AI space, this is not a pivot or a winding down,” Droege wrote in a post directed at customers, employees and investors.
Meta has a 49% stake in Scale after its $14.3 billion investment, though the social media company will not have any voting power. Scale AI’s founder Alexandr Wang, along with a small number of other Scale employees, will join Meta as part of the agreement.
“Scale remains, unequivocally, an independent company,” Droege wrote. “This deal rewards many of the people who helped build Scale into what it is today, but more importantly to me, it’s also a validation of the course we’re on.”
Scale AI appointed Droege, the company’s chief strategy officer, to serve as its interim chief executive following the deal. Droege wrote that Scale AI is still “a well-resourced company” that has “multiple promising lines of business.”
Founded in 2016, Scale AI rose to prominence by helping major tech companies like OpenAI, Google and Microsoft prepare data they use to train cutting-edge AI models. Meta has been one of Scale AI’s biggest customers.
Droege said the company is “not slowing down” and remains committed to its data and application business units. Scale will also continue to be model agnostic, he added.
“The need for high-quality data for AI models remains significant, and with the largest network of experts training AI, we are set up well to help model builders keep pushing the frontier of what’s possible,” Droege wrote.
But some of Scale AI’s tech customers may be having doubts.
OpenAI confirmed to CNBC on Wednesday that it has been wrapping up its work with Scale AI over the past six to 12 months. The company said it’s looking to work with other data providers that have kept pace with innovation, and that its decision to wind down its work with Scale wasn’t influenced by the Meta partnership.
Google is also reportedly cutting ties with Scale following the company’s deal with Meta, according to a report from Reuters. Google declined to comment.