Centralized exchanges (CEXs) like KuCoin, OKX (for non-P2P), and CoinEx have historically not reported to the IRS for smaller traders, while decentralized exchanges (DEXs) like Uniswap and SushiSwap (DEXs generally) don't report because they're non-custodial and don't require KYC, but new 2026 regulations mean centralized exchanges will issue Form 1099-DA for 2025 transactions, making it harder to avoid reporting. You are always responsible for reporting your own gains, regardless of the exchange's reporting practices, and using non-reporting exchanges doesn't exempt you from US tax law.
Phantom does not share data with the IRS or issue tax forms. That said, it's likely that the IRS can track your Phantom wallet transactions. 1099-DA: Starting with the 2025 tax year (forms sent in 2026), all US brokers must issue Form 1099-DA, reporting gross proceeds from digital asset sales.
There is no way to legally avoid taxes when cashing out cryptocurrency. However, strategies like tax-loss harvesting can help you reduce your tax bill legally. Converting crypto to fiat currency is subject to capital gains tax. However, simply moving cryptocurrency from one wallet to another is considered non-taxable.
5 Best Anonymous Crypto Wallets for 2025
Unlike selectively transparent alternatives (e.g. Zcash), Monero is the only major cryptocurrency where every user is anonymous by default. The sender, receiver, and amount of every single transaction are hidden through the use of three important technologies: Stealth Addresses, Ring Signatures, and RingCT.
Common Triggers
Individuals investing in Crypto should be aware of the following common errors that may trigger IRS scrutiny: Failure to Report Crypto Assets on Form 1040: Taxpayers must answer the digital asset question each year. Leaving it blank or ignoring it, even if no transactions occurred, can raise red flags.
As of 2024, Uniswap does not report directly to the IRS. Since it is a decentralized exchange (DEX), Uniswap operates without centralized control and does not require users to complete Know Your Customer (KYC) verification.
Robinhood reports every transaction to the IRS, so they'll know everything related to your Robinhood taxes. If you fail to report your Robinhood tax information, the IRS might assume that all of the proceeds from the transactions are gains and tax you on that total amount.
Donating crypto to a qualified charity may be tax deductible. Using crypto as collateral for a loan is generally tax-free since no sale occurs. Some states and countries offer reduced or zero taxes on crypto income and capital gains. Accurate records help you avoid penalties and ensure correct tax reporting.
Strategies to consider for reducing crypto taxes
You can potentially minimize your crypto tax liability in several ways, including: Hold it long-term to get a lower tax rate. Holding crypto for more than one year allows you to qualify for lower long-term capital gains tax rates.
In the US, all cryptocurrency exchanges must report transaction information to the IRS under the Bank Secrecy Act. This includes customer names, addresses, SSNs, and transaction details.
If you transfer virtual currency from a wallet, address, or account belonging to you, to another wallet, address, or account that also belongs to you, then the transfer is a non-taxable event, even if you receive an information return from an exchange or platform as a result of the transfer.
Here are a few cryptocurrency exchanges that don't require Know Your Customer information from customers and do not send 1099 forms. These are mostly P2P and decentralized exchanges that are not subject to the same requirements: RoboSats. Bisq.
While there is hope and the chances of being audited are relatively low (less than 1% of all taxpayers in 2024), crypto investors could face a slightly higher risk due to the complexities of digital assets.
1. Monero (XMR) Monero (XMR) is a cryptocurrency designed primarily for the ability to help anonymize users. 3 Monero transactions are much more difficult to trace because they use ring signatures and stealth addresses.
The IRS generally can't seize assets essential for basic living, like necessary clothing, schoolbooks, furniture, and tools of your trade (up to certain limits), plus items like unemployment, workers' comp, child support, and public assistance payments, along with a portion of your wages. However, major assets like your home, vehicles, bank accounts, and retirement funds can be seized, though the IRS must follow procedures and often seeks the quickest collection method, usually targeting liquid assets first.
The IRS receives transaction and wallet data from exchanges which it uses to match your on-chain activities with your identity. Starting in 2025, crypto exchanges and brokers will be required to submit an increasing amount of user information to the IRS.