Failure to declare income
Failure to declare income: What can happen?
Failure to declare income — An overview of the experts from Kryptoanwalt.de
What is the non-explanation about?
Income is not declared when a tax return is filed but certain taxable income — such as profits from cryptocurrencies, staking rewards, airdrops, or income from spot trading — is not listed or only partially listed. In contrast to failure to submit the tax return, the return is therefore formally available, but its content is incomplete.
Why does this happen so often in the crypto sector?
Confusing transaction history
Several wallets, exchanges and DeFi protocols quickly lead to a data situation that can hardly be reconstructed without structured tools.
Misclassification
Rewards from lending, staking, or liquidity mining are falsely classified as tax-free or not recognized at all.
Underrated investment SO
Many investors do not know that private sale transactions involving cryptocurrencies must be reported separately in the SO attachment to the income tax return.
Legal classification
Whether the non-declaration is regarded as tax evasion (Section 370 AO) or as a frivolous tax reduction (Section 378 AO) depends on the degree of fault. Anyone who deliberately conceals income is committing a crime. On the other hand, anyone who provides incomplete information due to gross negligence is acting in violation of regulations. In both cases, there is a risk of back payment of the reduced tax including interest.
Possible consequences
Subsequent payment of reduced tax
The undeclared income is determined retrospectively. The fixed tax must be repaid in full.
evasion or back payment interest
Evasion interest in accordance with Section 235 AO in the amount of 0.5% per month is charged — possibly over several years.
fine or imprisonment
In the event of intent, a fine or — in serious cases — imprisonment of up to ten years may be considered. A reckless tax cut could result in a fine of up to 50,000 euros.
Extended fixing period
The regular fixing period of four years is extended to five years in the case of recklessness and to ten years in the case of intent.
Initiation of criminal tax proceedings
If there is initial suspicion of a tax offense, the Penitentiary and Criminal Affairs Office may initiate an investigation.
What can you do now?
Anyone who finds out retrospectively that income from the crypto sector has not been fully explained should act quickly but in a structured manner. Subsequent declaration or voluntary declaration in accordance with Section 371 AO is possible in many cases — but requires that the offence has not yet been discovered and that all tax bases are explained completely and correctly. An incomplete voluntary declaration does not exempt punishment and can even aggravate the situation.
Are you unsure whether all of your income has been declared?
Conclusion
The failure to declare income is not a side issue in the crypto sector — it is one of the most common causes of disputes with the tax office. It is crucial to honestly assess your own situation and to correct it expertly. With specialized legal support, criminal proceedings can often be avoided and back payments can be processed in a controlled manner.
This information is intended as general guidelines and cannot replace individual advice from our experts. The legal and tax treatment may vary depending on your specific situation and current regulations. It is highly recommended that you contact our lawyers to clarify your personal situation and meet legal requirements.