Nft Tax Advisor Miami

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

This is how the cryptocurrency audit process operates:

• The IRS will request records to support the data on your tax returns. This might 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 years in question.
• The audit examiner's primary goal is to verify whether you reported correctly and paid the appropriate taxes.
• At the conclusion of your audit, they will evaluate the amount owed. Collections won’t commence straight away, and you do have the option to appeal. 
• If, during your crypto audit, the IRS discovers evidence suggesting you deliberately tried to conceal funds or otherwise commit a tax crime, they might refer the case to the Criminal Investigations Division or the Department of Justice for criminal prosecution.

Common triggers for a cryptocurrency audit include:

• Not reporting crypto on your tax return
• Excluding certain exchanges or wallets from your return
• Miscalculating your capital gains or ordinary income

Many digital asset exchanges disclose some information about your activity to the IRS. If your tax return doesn’t align, you could get flagged. This is true even if you lost money or realized minimal gains.

Once the IRS starts receiving Form 1099-DA from crypto exchanges, we anticipate a surge in cryptocurrency audits.

A standard audit covers your last 3 years of tax returns. However, during the audit process, if the IRS finds reason to believe you’ve underreported by at least 25%, they can extend up to 6 years.

If you’ve handled crypto for several years and didn’t always report it properly, this could likely occur with you.

For instance, let’s assume you’re undergoing a crypto audit for the years 2017, 2018, and 2019. When the IRS examiner reviews your records for 2017, they notice some coins were sold. They inquire when you first acquired those coins, and you clarify it was in 2014. 

If you didn’t report any cryptocurrency before 2017, the IRS examiner might now suspect you significantly underreported your taxable income. Thus, the years 2014, 2015, and 2016 might also become subject to audit.

If the IRS deems you've committed tax fraud, no statute of limitations applies to the audit. They can go back as far as desired in those cases.

As mentioned earlier, most IRS examiners aren’t even familiar with what Bitcoin is—let alone how it should be reported. You need a tax lawyer who:

• Is adept at navigating the audit process
• Can construct an accurate crypto tax report (even if you’ve lost keys or utilized a now-defunct exchange)
• Understands digital asset tax law thoroughly to defend your reporting methods

A crypto tax report is an exhaustive account of every transaction—including timestamps of each purchase and sale, the initial coin expenditure, and the sale revenue. This data determines your capital gain or loss for each transaction. 

There are additional factors to consider: Long-term gains and short-term gains are taxed at varying rates. Some crypto counts as income and requires separate reporting. 

Creating a precise crypto tax report can be a laborious, time-intensive task. Never assume the IRS will put in the effort to calculate the exact amount owed on your behalf!

We’ve assisted numerous clients in compiling crypto tax reports for previous years, even when they lack complete records or have lost access to old wallets. Our deep legal knowledge allows us to prepare crypto tax reports that withstand rigorous IRS scrutiny.

Many of our crypto clients haven’t reported out of concern they might be unable to cover the taxes on crypto profits.

What many don’t realize is that the audit process primarily focuses on ascertaining what you owe. Paying the entire tax amount isn’t mandatory immediately following the cryptocurrency audit's conclusion. 

A payment plan with the IRS is feasible. There’s almost always a payment plan or resolution that suits our clients and satisfies the IRS.

You can challenge your crypto audit findings! Our tax attorneys are licensed in US Tax Court, and we're capable of appealing your audit outcome to the highest levels.