IRS vs. Crypto: 5 Essential Tips to Avoid IRS Audits and Tax Penalties

March 16, 2023

Navigating the world of crypto taxes can be overwhelming, but the consequences of not doing it right can be even worse. The good news is that there are steps you can take to avoid IRS audits and tax penalties!

Here are 5 essential crypto tax tips that can help you reduce your tax liability, stay compliant with tax laws, and protect your bank account.

If you want to save time, save money, and keep the IRS off your back, contact us now to have your crypto taxes professionally prepared! Use the contact form below or call (847) 580-1279.

1. Report Crypto Losses

Reporting any capital losses on your tax return can help reduce your tax liability for the current year and even in future years. Even if you didn’t make a profit, report your crypto activity! Learn more about tax loss harvesting with cryptocurrency in the video below.

2. File Your Taxes On Time

If you can’t pay your crypto taxes in full, it’s still important to file your tax return on time or request an extension by the deadline. Failure to do so can result in high IRS tax penalties.

You can also submit a partial payment by the deadline and pay the rest later. There’s still a penalty for any unpaid balance, but it’s significantly lower than the failure to file penalty.

3. IRS Payment Plans

If you can’t pay your taxes in full, the IRS offers payment plans to help you pay your tax debt over time. You may be able to get up to 6 years to pay it off! Ask our experienced crypto tax attorneys about your options.

4. Don’t Trust Crypto 1099s

If you trade cryptocurrency, don’t assume that your tax forms from exchanges will be accurate. Whether your exchange sends a 1099-MISC, 1099-B, or 1099-K, the form you receive most likely won’t contain all the information you need to actually complete your crypto tax report. Watch our video breakdown of what these forms actually report and what they’re missing.

Learn more about how to report cryptocurrency accurately (and avoid IRS problems) with our simple Crypto Tax Guide!

5. Ask a Crypto Tax Pro

Seek professional advice if you’re unsure about how to report your capital gains, income, or deductions related to cryptocurrency. Legal analysis is often required for crypto tax, and it’s important to get it right to avoid penalties or audits!

Gordon Law Group has been one of the most trusted names in the world of cryptocurrency tax preparation since 2014.

Our team, led by Tax Attorney & CPA Andrew Gordon, has prepared hundreds of cryptocurrency tax returns at all levels of complexity. Our clients have saved millions of dollars on their taxes through our personalized tax preparation, tax planning, and tax resolution services. Contact us below or call (847) 580-1279 today to get your crypto taxes done right and avoid IRS audits and penalties!

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