Irs Crypto Reporting Miami

Whether you’re being audited due to crypto or your investments are complicating the process, the goal is to prove that your tax returns were filed accurately and the correct amount was paid.

Here’s how the cryptocurrency audit process works:

• The IRS will request records to verify the information on your tax returns. This can include paychecks, bank statements, and receipts for claimed expenses.
• For a cryptocurrency audit, you will also need a detailed report of your trading history for the years in question.
• The audit examiner’s main aim is to confirm that you reported correctly and paid the appropriate amount in taxes.
• At the conclusion of your audit, they will assess any amount owed. Collections won’t begin immediately, and you have the option to appeal. 
• If, during your crypto audit, the IRS finds a reason to suspect you intentionally attempted to hide funds or commit a tax crime, they may refer the case to the Criminal Investigations Division or the Department of Justice for criminal prosecution.

Common triggers for a cryptocurrency audit include:

• Failing to report crypto on your tax return
• Omitting certain exchanges or wallets from your return
• Miscalculating your capital gains or ordinary income

Many digital asset exchanges report some information about your activity to the IRS. If your tax return doesn’t match, it could trigger a flag. This is true even if you lost money or made minimal gains.

Once the IRS starts receiving Form 1099-DA from crypto exchanges, we expect cryptocurrency audits to increase significantly.

A standard audit reviews the last 3 years of tax returns. However, during the audit process, if the IRS suspects underreporting by at least 25%, they can look back 6 years.

If you’ve held crypto for several years and haven’t consistently reported it properly, this situation might apply to you.

For instance, let’s say you’re undergoing a crypto audit for 2017, 2018, and 2019. When the IRS examiner reviews your 2017 records, they see some coins were sold. They ask when you first acquired those coins, and you mention buying them in 2014. 

If you didn’t report any cryptocurrency before 2017, the IRS examiner might have a reason to believe you’ve significantly under-reported your taxable income. In that case, the years 2014, 2015, and 2016 may also be subject to audit.

If the IRS suspects tax fraud, there is no statute of limitations for the audit. They can go back as far as they wish in such cases.

As mentioned before, most IRS examiners don’t even know the basics about Bitcoin is—let alone how it should be reported. You need a tax lawyer on your side who:

• Knows how to navigate the audit process
• Can build an accurate crypto tax report (even if you’ve lost keys or used a defunct exchange)
• Knows digital asset tax law thoroughly to defend your reporting methods

A crypto tax report involves a detailed account of every single trade—including timestamps of when you bought and sold, the initial amount spent on the coin, and how much it was sold for. This information is used to calculate your capital gain or loss for each transaction. 

There are other factors to consider, too: Long-term gains and short-term gains are taxed at different rates. Some crypto is counted as income and must be reported separately. 

Creating a proper crypto tax report can be an arduous, time-consuming process. Do not assume the IRS will conduct the necessary work to calculate the accurate amount owed for you!

We’ve helped hundreds of clients create crypto tax reports for previous years, even without complete records or with lost access to old wallets. We know the law inside and out, so we can create crypto tax reports that withstand the most stringent IRS examination.

Many of our crypto clients haven’t reported because they’re afraid they won’t be able to pay the taxes they owe on crypto gains.

What most people don’t realize is that the audit process is only concerned with calculating the amount you owe. You don’t have to pay your entire tax bill immediately after the cryptocurrency audit is concluded. 

You can create a payment plan with the IRS. There’s virtually always a payment plan or resolution option that satisfies our clients and meets IRS requirements.

You can even appeal your crypto audit results! Our tax attorneys are licensed in US Tax Court, so we can appeal your audit decision to higher levels.