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Aug 01, 2024

By Clinton Donnelly

Staying compliant with IRS regulations is crucial, especially for crypto traders. Let’s discuss the IRS audit process and how to manage it.

The IRS Audit Process

Getting selected for an IRS audit isn't random. The IRS uses sophisticated data mining techniques to pinpoint candidates, often flagging those with suspected false representations or unreported income.

Crypto Investor Concerns

Audits often uncover unreported trading proceeds. This can trigger red flags. Four to six months later, an IRS revenue agent contacts you. They’ll specify the tax year in question and request detailed information.

IRS Focus

The IRS focuses on specific years, not your entire financial history. However, they might expand the audit up to three years if they suspect illegal activities.

Document Requests

Crypto audits demand extensive documentation. Provide exchange names, wallet addresses, and comprehensive transaction histories. Accuracy and completeness are crucial.

IRS agents don’t analyze your crypto data themselves. They pass it to subject matter experts. These experts take five to six months to recalibrate your reported gains.

Length and Stress of an Audit

An IRS audit averages 15 months. If the case needs to be sent to IRS Appeals or the US Tax Court, it could add another two years. The process can be emotionally exhausting and can lead to marital stress or divorce. The financial uncertain can be extremely.

Honesty alone won’t suffice. Adhering to IRS procedures is paramount. Auditors follow a mechanical, detail-oriented process. Ignoring these cause many taxpayers to miss out on their rights and protections. 

 

Avoiding Audits

The best way to handle an audit is to avoid one altogether. CryptoTaxAudit offers courses on how to file crypto tax returns correctly. We monitor your IRS accounts regularly to spot potential audit flags early. We’ve helped many clients avoid audits by promptly filing any missing returns.

 

Conclusion

Accurate tax filing is your best defense against an IRS crypto audit. Stay vigilant and report all crypto transactions correctly. For expert guidance, visit CryptoTaxAudit for a comprehensive crypto tax consultation.

Don't wait until it's too late—secure your compliance today!

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