The IRS is auditing more crypto traders than ever before. If you are facing crypto audit defense attorney, do not panic - but do not ignore it either. Your response in the first 30 days sets the tone for the entire examination.
Why You Were Selected
The IRS received data from your exchange showing transactions that do not match your filed return - or showing transactions when you did not file at all. They may also have traced on-chain activity through blockchain analytics tools. The selection was not random. They have information suggesting a discrepancy.
The Biggest Mistake People Make
Responding to an audit without professional help is the single biggest mistake crypto traders make. The IRS agent has experience in these examinations. They know what questions to ask and how to interpret the answers. Saying the wrong thing - or providing documents without understanding their implications - can dramatically increase your liability.
Building Your Defense
Effective audit defense starts with reconstructing your complete transaction history. Every exchange, every wallet, every DeFi interaction. Then you calculate accurate cost basis for each transaction. Often, the IRS assessment is inflated because they assumed zero cost basis on transactions where they lack purchase data. Proving your actual cost basis can reduce the assessment substantially.
After the Audit
If you disagree with the audit findings, you can appeal through the IRS Office of Appeals or petition the US Tax Court. Both options have specific deadlines that must be met. Missing these deadlines means accepting the IRS determination.
Frequently Asked Questions
Can the IRS track my crypto wallets?
Yes. The IRS contracts with blockchain analytics companies that can trace transactions across wallets, exchanges, and DeFi protocols. On-chain transactions are permanently recorded and can be linked to known identities through exchange KYC data.
What triggers an IRS crypto audit?
Common triggers include large transactions on 1099 forms, failure to report crypto on your return, discrepancies between exchange data and your filed return, and random selection. High-volume traders and those with large unreported gains are at higher risk.
Can I negotiate during a crypto audit?
You can dispute findings and present evidence during an audit. If you disagree with results, you can appeal through the IRS Office of Appeals or petition US Tax Court. Having representation significantly improves outcomes.
Get Crypto Tax Help Now
Dealing with crypto audit defense attorney can feel overwhelming, but there are options. Call the Law Offices of Darrin T. Mish, P.A. at (813) 229-7100 for a free consultation. We have resolved over $100 million in IRS tax debt.