Understanding IRS Crypto Audit Triggers

Understanding IRS Crypto Audit Triggers

Understanding IRS Crypto Audit TriggersSteve Perry
Published on: 01/07/2025

- Since IRS Notice 2014-21, cryptocurrencies are treated as property for tax purposes, making crypto transactions subject to reporting like stock transactions. - The IRS actively enforces crypto tax compliance, including a direct question on Form 1040 about digital asset activity, flagging potential audits. - Audits can be triggered by large or frequent transactions without reported income, inconsistent capital gains reporting, suspicious wallet transfers, or missing 1099 forms. - During audits, taxpayers must provide detailed transaction records, wallet and exchange statements, and proofs of gain/loss calculations; discrepancies can lead to penalties or legal consequences. - Enrolled Agents like Steve Perry offer expertise in interpreting blockchain data, representing clients before the IRS, negotiating penalties, and assisting with voluntary disclosures for prior errors. - As cryptocurrency use grows, accurate record-keeping and reporting is crucial to avoid IRS penalties, and professional tax assistance is key when facing audits.

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The IRS is issuing John Doe Summons to Catch Crypto Traders

The IRS is issuing John Doe Summons to Catch Crypto Traders

The IRS is issuing John Doe Summons to Catch Crypto TradersSteve Perry
Published on: 07/06/2025

Many virtual currency traders once believed their transactions weren’t taxable, but the IRS has since cracked down. Traders often misunderstood that exchanges—like banks—can be compelled to disclose user data through a legal tool called a **John Doe Summons**, without notifying the taxpayer. A landmark court case involving **Coinbase** affirmed the IRS's authority to use this method, rejecting challenges based on the Fourth and Fifth Amendments due to the exchange’s status as a third party. This case serves as a clear warning: **Don’t try to hide income from the IRS.** The agency has powerful tools to uncover unreported income and assets, especially in crypto. Failing to report can result in steep penalties and interest. On the other hand, reporting a non-taxable transaction has no downside. Always be transparent with your tax professional. For expert guidance on cryptocurrency tax issues, call **Books, Taxes & More** at **678-717-9818** and ask for **Steve**.

Tax education articles and IRS representation advice for individuals and small businesses
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