Crypto tax software is supposed to reduce risk, not create it. But when underlying data is altered, overwritten, or misrepresented, the taxpayer is the one left holding the liability. Over the past several days, our team has identified a serious reporting issue affecting some users of ZenLedger that raises exactly that concern.
In certain accounts, token quantities appear to have been overwritten or replaced by their USD value, creating balances and transaction volumes that are mathematically impossible. A transaction that should reflect 0.5 Bitcoin, for example, may now appear as 50,000 Bitcoin because the dollar value was substituted for the token amount. If this issue affects underlying reports rather than just the display, the consequences are significant.
This is not a cosmetic problem. It is a legal and compliance problem.
Why This Type of Error Is So Dangerous
Crypto tax compliance depends on three things: accurate transaction history, correct token quantities, and defensible cost basis. When any one of those breaks, everything downstream breaks with it. Capital gains calculations become unreliable. Prior year positions no longer reconcile. Closing balances stop matching opening balances in subsequent years.
From the IRS’s perspective, none of that matters. If you file a return with incorrect data, the responsibility is yours, not the software’s.
Even worse, once a return is filed, incorrect data becomes part of your permanent tax record. Fixing it later often requires amended returns, explanations, and in some cases audits.
What Appears to Have Triggered the Issue
Based on our review, the issue appears to be tied to recent allocation recalculations within the platform. Many users were prompted to revisit cost basis allocation methods, including shifts to buy wallet style tracking. After accepting those changes, some accounts showed altered token volumes and distorted transaction histories.
At this stage, it is still being determined whether the problem is limited to how data is displayed in the user interface or whether it impacts exported reports used for tax filing. That distinction is critical. A visual glitch is inconvenient. A reporting error is catastrophic.
Until that question is definitively answered, taxpayers should assume the risk is real.
Why Prior Year Reports Matter More Than Ever
One of the most overlooked aspects of crypto tax compliance is continuity across years. The IRS does not evaluate each tax year in isolation. It expects opening positions to match prior year closing positions. Cost basis carries forward. Holding periods continue.
If a software recalculation overwrites historical assumptions, even if the total value looks similar, the underlying math may no longer tie out. That creates red flags during audits and mismatch reviews, especially as third party crypto reporting expands.
This is why preserving prior year reports is essential. If you do nothing else, download and save your historical reports immediately.
What ZenLedger Users Should Do Right Now
If you use ZenLedger and notice unexpected changes in token quantities, balances, or transaction volumes, stop and do not file yet.
Review your most recent reports against prior year versions. Look specifically at token quantities, not just dollar values. If numbers no longer make sense, assume your data needs review before it can be relied upon.
Do not attempt to guess, manually override, or explain away discrepancies on a filed return. That often makes the situation worse.
Why This Is Bigger Than One Software Platform
This issue highlights a broader truth about crypto tax software. These platforms rely on assumptions, allocation logic, and imperfect data sources. When those assumptions change or data is lost, overwritten, or reinterpreted, the software has no legal exposure. You do.
As crypto reporting becomes more automated and more visible to the IRS, errors like this carry increasing enforcement risk. Mismatch notices, audits, and penalty assessments are driven by reported numbers, not explanations about why software behaved a certain way.
When Legal Review Is Necessary
At some point, crypto tax compliance stops being a software problem and becomes a legal one. When data is missing, altered, or unreliable, professional judgment and legal strategy are required to determine how to proceed in a defensible way.
This may involve reconstructing cost basis from independent records, relying on prior year filings, or preparing documentation that supports reasonable assumptions. Those are not decisions that should be made casually or without understanding enforcement risk.
The Bottom Line
Crypto tax software is a tool, not a guarantee. When that tool produces questionable data, filing anyway is one of the most dangerous choices a taxpayer can make.
If you are a ZenLedger user and believe your data may have been affected, the worst thing you can do is rush to file. The second worst thing is to assume the issue will not matter.
At Gordon Law, we represent taxpayers dealing with crypto reporting issues, audits, and enforcement actions every day. We help clients evaluate data integrity, preserve defensible positions, and avoid turning software errors into long term legal problems.
If your crypto tax data no longer makes sense, pause and get guidance before filing. In this environment, accuracy is not optional.
