We recommend reading this article about the IRS Crypto Tax Audit Notice.
A post about IRS Crypto Tax Audit Notice is making circles online. Whether this is a genuine one or not is unclear, but this one looks to be real (having seen many notices before, it falls in line). Below is the page from the notice:
As you can see, this request looks more like an alien anus probe...but it is generally how the IRS audits are conducted. They generally layout all the avenues known at the time of issuing notice so that the 'onus' lies on the taxpayer to produce the documentation and substantiate his/her position on the tax returns.
What happens if the taxpayer is not able to provide the necessary information?
If taxpayer refuses to respond to this audit or is not able to provide the information requested by the IRS, then IRS can:
- Assess taxes and penalties that they think are right
- Subpoena your emails, bank accounts and other financial accounts
- Take other legal action
What is my recourse if I get one of these audit notices?
If you have enough basis to substantiate your position on tax returns - then you simply provide your responses, documentation and information requested to the IRS appointed auditor.
These audits can be intimidating, as such, you might want to think about having representation for you during the audit.
Taxpayer advocate group is an option that could help you if you feel like the auditor is being unreasonable or if your case is not getting the right type of attention.
I want to avoid this in future, which crypto tax software should I use?
Which crypto tax software to use depends on your personal situation, like, how many transactions did you have. How many exchanges have you used, etc., Here is an article that goes deep into Crypto Tax Software comparison for 2020.
What not to do?
Do not ignore the notice.
Do not lie in your responses.
Do not under estimate IRS's powers.
