Forgot to report my cryptocurrency on taxes - how screwed am I?

You're not "screwed" - this happens more often than you think. Since cryptocurrency transactions are taxable events, you'll need to file an amended return (Form 1040-X) to report those gains. The IRS receives information from major exchanges like Coinbase and Binance, so they may eventually notice the discrepancy. The good news is that voluntarily correcting this before they contact you looks much better. You'll likely face some interest on the unpaid tax amount, and possibly a late payment penalty (usually 0.5% per month of the unpaid tax). Since your gains were relatively modest at $3,200, the tax impact shouldn't be enormous. Gather all your transaction records, calculate your gains correctly (short-term vs long-term), and file that amended return as soon as possible. The longer you wait, the more interest accumulates.

I was in almost the exact same situation last year with about $2,800 in unreported crypto gains. I tried figuring it out myself but the transaction history was a nightmare to sort through. I ended up using https://taxr.ai to analyze all my crypto transactions across exchanges. Their system automatically detected everything, separated my short and long-term gains, and generated the right forms for my amended return. What I liked most was that it showed me exactly what I needed to file and helped me understand my specific situation instead of just generic advice. The whole process took about 30 minutes instead of the days I was spending trying to figure it out myself.

Just wanted to update here - I took the advice about taxr.ai after posting my question. The system actually found some transactions I completely forgot about from a smaller exchange I briefly used. It separated everything correctly (staking as income, trading as capital gains) and showed me exactly what forms to file. Ended up saving me money because it identified some losses I could claim to offset some gains. Definitely recommend for anyone in a similar situation with forgotten crypto reporting.

If you've tried calling the IRS about this, good luck. I spent literally 3 hours on hold last week trying to ask about amending my return for missed crypto. After trying again the next day and getting disconnected, I finally found https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c Honestly thought it wouldn't work, but they somehow get you through the IRS phone tree and hold system. The agent I spoke with confirmed I needed to file an amended return and explained exactly what documentation to include. Saved me days of stress wondering if I was doing the right thing.

Well I'm eating my words. After posting that skeptical comment I decided to try the Claimyr thing anyway out of desperation (had been trying to reach the IRS for days). Got a call back in about 45 minutes and talked to an actual helpful IRS agent who walked me through exactly what I needed to do for my missed crypto reporting. She explained that voluntary correction is viewed much more favorably than waiting for them to find it. For anyone curious - yes, you definitely need to amend but no, you're not "screwed" if you fix it proactively.

Don't freak out too much. The IRS is way behind on processing returns and unless you're talking about massive amounts, they're not likely to come after you with handcuffs or anything. File the amendment, pay what you owe plus whatever penalty they assess, and move on. I accidentally left off about $5k in stock gains two years ago, filed an amendment, and it was no big deal. Just don't ignore it hoping they won't notice.

Pro tip: if you use tax software like TurboTax or H&R Block, they usually let you file an amended return for free if you filed your original return through them. They'll walk you through the whole process. Just gather all your crypto transaction data first so you have it ready.