Crypto taxpayers are for a rude awakening.
We are 16+ years in Bitcoin, yet taxpayers and CPAs still pretend that tax guidance remains unclear or even non -existent. The IRS is ready for a historic wave of compliance audits aimed at the crypto area and the taxpayers have no idea what they are in.
Last year, the IRS issued the revenue procedure 2024-28, which fundamentally changed how crypto should be traced from a tax perspective. Secretary of taxpayers for taxpayers to make compatible and deadlines to migrate by. The rules are clear, the expected expectations in which the IRS quietly places itself to issue a wave of compliance audits for those still with their heads in the sand.
The calculation begins already as we see an unprecedented amount of 6174, 6174-A and 6173 letters sent out of the IRS.
Typically, this time of year is quiet. But for the past several weeks, our phone has called non-stop from taxpayers who received these messages from the IRS that require them to get compatible “or otherwise.” And it’s not just us -crypto -tax companies all over the same activity, indicating that IRS knows that taxpayers have happened to be involved in crypto tax evasion, and they are here to collect what they have not collected in the last decade.
Strategic pairing of Rev-Proc 24-28 With the release of the new form 1099-da, the IRS is placed to blind-page taxpayers and CPAs that have neglected to become compatible. The tax year 2025 will be central as the IRS now has an abundance of ammunition to be used in revisions. Gone are the days when taxpayers could postpone to defense like “Well, the guidance was unclear, so I just did my best.” The IRS has been explicit, the guidance is clear, and the penalties for non -compliance have been described, yet taxpayers and CPAs assume that we are in the Wild West.
On top of this, form 1099-DAS will be issued to both taxpayers and IRS boats of brokers, but there is a large catch: the form does not include cost base for the tax year 2025 and will almost certainly include incorrect cost base this year after.
This means that when you transfer assets to a stock exchange and later sells them, the sale is reported – but the stock exchange has no idea what you originally paid. In the absence of this information, the form defaults on a cost base of $ 0. For the IRS or a traditional CPA, the pure merit.
Say you buy 1 ETH for $ 2,200, move it to Coinbase and sell it for $ 2,500. If Coinbase does not have the cost basis, the form shows a gain of $ 2,500. Your actual gain was $ 300 – but unless you have traced this basis yourself, the IRS does not know. And they assume the worst.
A widespread problem
This is not a one -off scenario. It will affect hundreds of thousands of taxpayers.
If these inflated gains are not corrected, they will either result in unnecessary tax caused by or trigger a revision. And many CPAs do not catch it because most people still are not equipped to handle crypto properly. They do not understand how wallets work. They confuse transfers with sales. They miss out on inserting rewards and defi activity completely. Customers think their CPA is on top of it. CPAs assume that 1099 is accurate. No one is double control.
This is where things go wrong. And that’s exactly what IRS expects.
The old defense – that the guidance was not ready – does not hold up anymore. IRS has been direct. Expectations are spelled. The time to solve things is now before a letter of enforcement is received.
Crypto is no edge case anymore. Tens of thousands of millions of Americans have bought, sold, stack, fast or transfer digital assets. Most have done a bad job of holding items. Some have not even tried. The result is a tax system full of under -reported winnings, miscarried income, inconsistent archives and the taxman looking for revenge.
The most common errors are not complex. Transfers between wallets are marked as sales. Assets appear on exchanges without cost basis attached. The punching of rewards and AirDrops is not reported. Defi -activity is missing completely. And year after year, taxpayers and professionals are dependent on CSV exports that were never designed for tax reporting in the first place.
These are not edge cases. They are thoroughly among cryptoinvestors. And on a scale, they add up to an observance problem that the IRS is now fully equipped to pursue.
This is no longer about gray areas or technical conditions. It’s about a growing discrepancy between how taxpayers believe that crypto fees work – and how the IRS now expects them to be handled. That gap is where the risk lives and with the established guidance the IRS does not draw any blows.
