Crypto Tax Compliance Miami

Whether you’re being audited because of your crypto, or your investments are simply complicating the process, the goal is to prove you filed your tax returns accurately and paid the right amount.

Here’s how the cryptocurrency audit process unfolds:

• The IRS will request documentation to support the information on your tax returns. This can include paychecks, bank statements, and receipts for any expenses you claimed.
• In a cryptocurrency audit, you will also need a comprehensive report of your trading history for the relevant years.
• The audit examiner’s primary objective is to determine whether you reported correctly and paid the accurate amount in taxes.
• Once your audit concludes, they will assess the owed amount. Collections won’t commence immediately, and you have the option to appeal. 
• If, during your crypto audit, the IRS suspects you intentionally attempted to conceal 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 activity information to the IRS. If your tax return doesn't match, you might get flagged. This applies even if you lost money or made minimal gains.

With the IRS beginning to receive Form 1099-DA from crypto exchanges, we expect cryptocurrency audits to increase significantly.

A standard audit covers your last 3 years of tax returns. However, if the IRS finds you’ve underreported by at least 25%, they can go back 6 years.

If you've had crypto for a considerable time and haven't always reported it properly, there's a good chance this could affect you.

For instance, let's say you're undergoing a crypto audit covering 2017, 2018, and 2019. When the IRS examiner examines your 2017 records, they notice coins sold. They ask when you acquired those coins, and you state 2014. 

If you didn’t report any cryptocurrency before 2017, the IRS examiner might suspect significant underreporting. Consequently, the years 2014, 2015, and 2016 might also become subject to an audit.

If the IRS suspects tax fraud, there's no statute of limitations for the audit, allowing them to reexamine all past records.

As previously mentioned, most IRS examiners aren't familiar with Bitcoin—let alone how it should be reported. You'll want a tax lawyer on your side who:

• Knows how to navigate the audit process
• Can compile an accurate crypto tax report (even if you’ve lost keys or used a now-defunct exchange)
• Is well-versed in digital asset tax law to support your reporting methods

A crypto tax report involves detailed accounting for each trade—including purchase and sale timestamps, initial purchase amounts, and sale prices, determining your capital gain or loss per transaction. 

Other factors also play roles: Long-term and short-term gains are taxed differently. Some crypto is regarded as income, requiring separate reporting. 

Don't assume the IRS will take the time to calculate the correct amount owed for you—compiling a proper crypto tax report can be meticulous and time-consuming!

We've assisted hundreds of clients with past-year crypto tax reports, even if they lack complete records or lost access to old wallets. Our in-depth legal knowledge ensures we create crypto tax reports that withstand rigorous IRS examination.

Many crypto clients haven't reported due to fears of not affording crypto gains taxes.

What many don't realize is the audit process focuses solely on determining the amount owed. After the cryptocurrency audit concludes, you aren't required to immediately settle your full tax bill. 

You can negotiate a payment plan with the IRS. There's almost always a payment or resolution plan that satisfies both our clients and the IRS.

You can even contest your crypto audit results! Our tax attorneys are licensed in US Tax Court, enabling us to appeal your audit decision at the highest levels.