Crypto Tax Resolution Miami

Whether your audit is triggered by your crypto or your investments complicate the process, the aim is to establish that you filed your tax returns accurately and settled the necessary amount.

Here's how the cryptocurrency audit process unfolds:

• The IRS will demand records to back up the data on your tax returns. This might include pay statements, bank records, and receipts for claimed expenses.
• If it's a cryptocurrency audit, you'll also require a detailed account of your trading history for the years concerned.
• The audit examiner's main goal is to verify whether you accurately reported and paid the right tax amount.
• At the conclusion of your audit, they'll determine the amount owed. Collections won't commence right away, and you have the right to appeal. 
• If during your crypto audit, the IRS suspects you intentionally concealed funds or committed a tax offense, they might transfer the case to the Criminal Investigations Division or the Department of Justice for legal proceedings.

Usual triggers for a cryptocurrency audit include:

• Not reporting crypto on your tax return
• Leaving out certain exchanges or wallets from your return
• Misjudging your capital gains or ordinary income

Many digital asset exchanges share some information about your activity with the IRS. If your tax return doesn't align, it could raise a red flag. This is applicable even if you incurred losses or had minimal gains.

With the IRS now receiving Form 1099-DA from crypto exchanges, we anticipate an increase in cryptocurrency audits.

A conventional audit encompasses your last 3 years of tax returns. However, if during the audit process the IRS has reason to believe you've underreported by at least 25%, they can examine up to 6 years back.

If you've held crypto for several years and haven't always reported it correctly, this could likely occur.

For instance, if you're undergoing a crypto audit covering 2017, 2018, and 2019, and the IRS examiner finds some coins were sold in 2017. They inquire about when those coins were first acquired, and you mention purchasing them in 2014. 

If you haven't reported any cryptocurrency before 2017, the IRS examiner might suspect notable underreporting of your taxable income. This may lead to audits for 2014, 2015, and 2016.

If tax fraud is suspected, there is no time limit for the audit. The IRS then can investigate as far back as necessary.

As discussed earlier, most IRS examiners are unfamiliar with what Bitcoin is—let alone how it should be documented. You require a tax attorney who:

• Is well-versed in navigating the audit process
• Can compile an accurate crypto tax report (even if you've lost keys or invested via now-defunct exchanges)
• Has an in-depth understanding of digital asset tax law to justify your reporting methods

A crypto tax report involves a meticulous record of every trade, including times of purchase and sale, the initial coin expenditure, and the selling price. This helps calculate your capital gain or loss for each transaction. 

Other considerations include: Long-term versus short-term gains, which are taxed differently. Some crypto counts as income and must be documented separately. 

Assembling an accurate crypto tax report is a tedious, time-consuming task. Do not assume the IRS will complete the work to determine the correct amount owed on your behalf!

We've assisted hundreds of clients in generating crypto tax reports for previous years, even without complete records or access to older wallets. With our comprehensive knowledge of the law, we can create crypto tax reports that withstand rigorous IRS scrutiny.

Many of our crypto clients haven’t reported because they're concerned about paying the taxes owed on crypto earnings.

What most do not realize is that the audit primarily focuses on determining your owed amount. Full payment of your tax liability isn't required immediately post-audit. 

You can establish a payment plan with the IRS. There’s nearly always a payment or resolution solution that suits both our clients and satisfies the IRS.

You can appeal your crypto audit results as well! Our tax attorneys are authorized to practice in US Tax Court, enabling us to appeal your audit to the highest levels.