Crypto Taxes Miami

Whether you’re audited due to your crypto, or your investments are merely complicating the process, the goal is to prove that you filed your tax returns correctly and paid the right amount.

Here’s how the cryptocurrency audit process follows:

• The IRS will request documentation to support the information on your tax returns, which may include paychecks, bank statements, and expense receipts you claimed.
• For a cryptocurrency audit, a detailed report of your trading history for the concerned years will be needed.
• The audit examiner aims to ascertain whether you reported accurately and paid the correct taxes.
• Upon audit completion, the amount owed will be assessed. Collections won’t start immediately, and you do have an option to appeal. 
• If during your crypto audit, the IRS finds reason to suspect intentional fund concealment or any tax offences, they may refer the case 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 report some activity information to the IRS. If your tax return doesn’t align, it can get flagged. This holds true even if you incurred losses or minimal gains.

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

A standard audit examines your last 3 years' tax returns. However, if the IRS suspects underreporting by at least 25% during the audit process, they can extend the review to 6 years back.

If you’ve had crypto for several years but haven’t consistently reported it correctly, this situation might occur.

For instance, if you're subject to a crypto audit covering the years 2017, 2018, and 2019, and the IRS notices any discrepancy in 2017 records, they may inquire about coin acquisition in previous years. If it’s found that no crypto was reported before 2017, the IRS may inspect the years 2014, 2015, and 2016 as well.

In cases where tax fraud is suspected, there's no statute of limitations for audits, allowing extensive retrospective scrutiny.

As previously mentioned, many IRS examiners might not fully grasp Bitcoin or its reporting requirements. You need a tax lawyer who:

• Understands the ins and outs of the audit process
• Can compile an accurate crypto tax report (even amidst lost keys or redundant exchanges)
• Has deep expertise in digital asset tax laws to justify your reporting accuracy

A crypto tax report is a detailed summary of every trade — including the trade timestamps, the cost basis, and the selling price for each asset. This data is used to determine capital gains or losses for every transaction. 

Additional factors might apply: Long-term and short-term gains face different tax rates. Some crypto income is handled separately. 

Drafting a proper crypto tax report demands laborious and meticulous efforts. Do not presume the IRS will do the work of calculating the appropriate owed amount for you!

We've supported numerous clients in curating crypto tax reports for previous years, despite incomplete records or loss of old wallets. Our extensive tax law acumen enables us to create sustainable crypto tax reports against rigorous IRS evaluations.

Many of our crypto clients refrain from reporting due to fear of not being able to pay the taxes owed on crypto gains.

Most individuals fail to comprehend that the audit solely determines the tax amount owed. No obligation exists to fully pay the tax bill right after completing the cryptocurrency audit. 

You can arrange an IRS payment plan. There's almost always a payment or resolution option aligning with our clients’ needs and fulfilling IRS expectations.

The opportunity to appeal your crypto audit results exists! Our tax attorneys hold licenses in US Tax Court, empowering us to challenge audit decisions at advanced levels.