IRS notices about crypto are increasing dramatically as exchange reporting expands. If respond irs crypto notice landed in your mailbox, here is what to do.
Read It Carefully
Every IRS notice includes a notice number, a response deadline, and specific proposed changes. The notice number tells you what type of issue the IRS is raising. The deadline is real - missing it has consequences. The proposed changes show exactly what the IRS thinks you owe and why.
Common Crypto Notice Scenarios
Scenario one: the IRS received a 1099 showing $50,000 in crypto proceeds that you did not report. Scenario two: you reported crypto income but the amount does not match exchange data. Scenario three: the IRS determined you owe additional tax and is proposing an assessment. Each scenario requires a different response strategy.
Gathering Your Documentation
To respond effectively, you need your exchange transaction records, purchase documentation establishing cost basis, records of transfers between wallets and exchanges, and any correspondence or forms previously submitted. If your records are incomplete, a crypto tax professional can help reconstruct them from available data.
Do Not Just Agree
Many taxpayers receive an IRS notice, see a large proposed assessment, and simply agree because they think fighting is futile. This is a mistake. The proposed assessment almost always assumes zero cost basis, inflating the tax owed. Providing accurate cost basis information can reduce the assessment dramatically. Always review, always respond, and always consider professional representation.
Free Consultation Available
If respond irs crypto notice is keeping you up at night, pick up the phone. Call the Law Offices of Darrin T. Mish, P.A. at (813) 229-7100. After 32 years of resolving IRS problems, we know how to handle this.