Crypto Tax Reporting Guide

As we race toward the April 15 tax filing deadline, I want to flag a serious risk I’m seeing too often: ➡️ Relying solely on crypto tax software reports — without proper reconciliation — can be a costly mistake. ➡️ And for tax preparers, blindly taking the crypto report a client provides you (without checking accuracy) could expose you to professional penalties and liability. Let’s be clear about the risks: 📌 For the Taxpayer: Crypto tax software is only as good as the data it receives. Missing wallet connections, untracked DeFi activity, misclassified NFTs, staking income errors, duplicate transactions — they happen all the time. 🔴 If your report is wrong, you could: - Overpay taxes because of overstated gains. - Underreport income and face audits, penalties, interest — and in severe cases, even civil fraud charges. - Face headaches down the road if you need to amend returns (and trust me, amending crypto tax returns is a painful process). 📌 For the Tax Preparer: If you simply accept a crypto tax report at face value: - You risk IRC §6694 preparer penalties. - You could be seen as failing due diligence under Circular 230. - You risk your professional reputation and even legal exposure if the return is materially inaccurate. 🚫 Beware of Bad Advice Some tax preparers (usually those unfamiliar with crypto) are telling clients: - “Just leave the crypto out for now.” - “Don’t file the tax return until you figure this out.” Both are risky paths. Failing to file is never the solution, and leaving crypto activity off the return only invites IRS scrutiny later. ✅ Here’s What You Should Do Right Now: - File an extension. This buys you time to properly reconcile your crypto activity and get the return right, rather than rushing to file an incorrect return and later having to amend. - Do not skip reconciliation. No matter how “complete” your crypto tax report looks, confirm every wallet, exchange, and transaction is properly accounted for. Also, make sure all the transactions are correctly categorized for tax purposes. - Tax preparers: Ask tough questions. If you’re not knowledgeable about crypto, work with crypto tax experts who know how to spot errors and fix them before filing. This will help keep both yourself and your clients out of trouble with the IRS down the road. 🧩 Crypto tax reporting is complex, and the IRS is watching. With new reporting rules like Form 1099-DA coming soon, accuracy matters more than ever. If you’re feeling unsure about your crypto tax report or want to double-check before filing, feel free to reach out! #CryptoTax #TaxDeadline #CryptoCPA #CryptoInvestors #TaxCompliance #IRS #DeFi #NFTs #TaxSeason #CryptoAccounting #TaxExtension #FilingDeadline

The best crypto CPAs have one thing in common. They trade crypto themselves. Not for the returns. For the experience. There's a difference between knowing a token swap is a taxable event and having lived this: You submit a Uniswap transaction. Gas spikes. It sits pending for 20 minutes. Fails. You forget about it. Three months later, you realize you never recorded it — and you still owe capital gains on the gas fees. The best crypto tax professionals have felt that "oh no" moment themselves. They've had 14 wallets, 3 exchanges, and "some NFTs I forgot about." They understand the chaos intuitively, not from a textbook. It's why we dogfood everything at CoinTracker. I calculate my own crypto taxes through our product every year. So does our team. We're the exact users we're building for. Technical knowledge matters. But lived experience is what turns a good tax professional into someone who actually gets it. If you're an accountant considering or serving crypto clients: go buy some ETH. Swap it. Stake it. Bridge it. Try to track the cost basis yourself. Then you'll understand what your clients are dealing with. 1099-DAs are coming. The CPAs who learn this now will own the next decade. The ones who wait will be playing catch-up forever.

"Challenging the Erroneous Form 1099-DA: A Practitioner's Roadmap from Blockchain to Trial." By Frank Agostino, Abdulrahman Azzouni, and Shan Kadkoy In 2025, the IRS began receiving Form 1099-DA from hundreds of digital asset brokers. Millions of forms. A significant portion reporting $0 cost basis — not because the taxpayer paid nothing, but because the broker's system couldn't see what the taxpayer originally paid. The matching machine doesn't know the difference. It flags the mismatch. It generates a CP2000. And unless the practitioner knows exactly what to do, the client pays tax on income that was never realized. This article is the protocol. It covers: • Why Form 1099-DA gets it wrong — the structural disconnect between decentralized blockchains and the IRS's centralized matching system • The four error patterns every practitioner must classify at intake: phantom dispositions, zero-basis defaults, characterization errors, and DeFi ambiguities • The regulatory landscape — T.D. 10000, the CRA nullification of T.D. 10021, Notice 2026-20's specific identification relief, and Rev. Proc. 2024-28's basis allocation safe harbor • IRS Criminal Investigation's record-breaking FY2025 results: $10.59 billion in financial crimes identified, 2.35 petabytes of digital data seized, and the DOJ's first stand-alone crypto tax prosecution (United States v. Ahlgren) • The five-step protocol from intake through Tax Court — including the Branerton conference as a tactical weapon and Rule 147 subpoenas to compel broker production • Why I.R.C. § 6201(d) burden-shifting has never been applied in a published digital asset case — and why the first well-pleaded case may define this area of law • The math error trap under § 6222(b) that strips Tax Court jurisdiction when Form 8082 is not filed • Offensive strategies: § 7434 civil damages and §§ 6721/6722 penalty leverage (5% of aggregate reportable amount for § 6045 returns — with no annual cap) Three appendices include an intake checklist, a model Form 8275 disclosure narrative, and a model demand letter. The forms are frequently wrong. The IRS presumes they are right. The practitioner's job is to make the record that proves otherwise. ——— 🔥 YOU ARE INVITED 🔥 TAC Annual Tax Controversy Seminar & BBQ A "Thank You" to the Tax Controversy Community and Our Pro Bono Volunteers 📅 Wednesday, June 24, 2026 📍 Seminar: 8:00 AM – 12:30 PM | Bergen Community College, Lyndhurst, NJ 📍 BBQ: 1:00 PM | 14 Washington Place, Hackensack, NJ Both events are complimentary. Open to all tax professionals. CLE / CPE / CE Credits Available. RSVP by June 22 at Tax Practice Pro or email Eric Chen at echen@agostinolaw.com.

In addition to the final broker reporting regs released on June 28, the IRS also released several Notices and a Revenue Procedure. Revenue Procedure 2024-28 may be of particular interest. Why? - If you have previously taken an approach to determining the cost basis of your crypto sales by looking at all of your crypto sources and "mashing them together" as if they were held in one account (universal approach), that approach could be fine through 12/31/2024. - However, the IRS disagrees with this approach, so they are providing guidance on how to transition to a wallet-by-wallet approach beginning on 1/1/2025. - Revenue Procedure 2024-28 provides a safe harbor and two different methods for allocating the remaining cost basis at 1/1/2025 to each specific wallet or account to conform with the wallet-by-wallet approach. - Adhering to the safe harbor generally protects taxpayers from being assessed additional tax, penalty and interest. - In order to comply, amongst other tedious details, you must be able to identify and maintain records sufficient to show the total number of remaining digital asset units in each of the wallets or accounts at 1/1/2025, the number of units of unused basis, the original cost basis of each such unit of unused basis, and the acquisition date of the digital asset unit to which the unused basis was originally attached. ❗Here's the kicker: To meet the safe harbor standards, you must make a specific unit allocation (i.e., specifically identify which cost basis goes to which wallet or account) NO LATER THAN the first transaction completed on or after 1/1/2025 OR make a global allocation by describing the allocation method in the taxpayer’s books and records before 1/1/2025. - In other words, you have about 5.5 months to work through this reconciliation process. - If you are a taxpayer that has used a universal approach in the past, you may want to investigate *now* how to transition to the wallet-by-wallet approach. - If you have used a crypto tax aggregator in the past, now is the time to ask them how they plan to account for this change.

The "1099-DA Wave" has officially arrived. Digital asset brokers are issuing the first-ever 𝟭𝟬𝟵𝟵-𝗗𝗔s. If your clients traded crypto, NFTs, or stablecoins in 2025, these forms are hitting mailboxes, and the IRS database right now. This is the biggest shift in digital asset tax compliance in history. Here is what tax professionals need to know to survive this filing season:  • 𝗚𝗿𝗼𝘀𝘀 𝗣𝗿𝗼𝗰𝗲𝗲𝗱𝘀 𝗢𝗻𝗹𝘆: For 2025 transactions, brokers are only required to report the sale price.  • 𝗧𝗵𝗲 "𝗕𝗮𝘀𝗶𝘀 𝗚𝗮𝗽": Most forms will show zero cost basis. Under IRS rules, missing basis defaults to zero, leading to inflated tax bills and massive audit exposure.  • 𝗥𝗲𝗰𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗶𝘀 𝗠𝗮𝗻𝗱𝗮𝘁𝗼𝗿𝘆: You’ll need to help clients manually reconstruct records for assets acquired before 2026.  • 𝗧𝗵𝗲 𝗖𝗹𝗼𝗰𝗸 𝗶𝘀 𝗧𝗶𝗰𝗸𝗶𝗻𝗴: Brokers must furnish these to recipients by February 17, 2026. We’ve put together a complete 2026 Guide to Form 1099-DA to help you navigate the phased timeline, identify who must file, and protect your clients from overpaying. Check out the link in the comments! #Accounting #CryptoTax #IRS #1099DA #CPA

Year-end crypto tax content is overwhelmingly focused on loss harvesting. Most advisors correctly note that wash sale rules generally do not apply to digital assets today because crypto is typically treated as property, not stock or securities. What’s largely missing are the two conditions that determine whether those losses survive enforcement. 1️⃣ A loss is only as real as the basis you can substantiate Rev. Proc. 2024-28 pushed taxpayers to transition away from universal pooling toward wallet-/account-level lot tracking and defensible basis allocation. Without defensible basis: 👉 You can’t reliably identify which units were disposed of 👉 Reported losses may not correspond to actual lots 👉 “Harvested” losses become difficult to sustain on exam 2️⃣ Anti-abuse doctrines still apply to loss recognition Even where wash sale rules are not implicated, losses remain subject to anti-abuse doctrines, including substance-over-form, sham transaction, step transaction and economic substance. The absence of §1091 does not immunize losses that fail these tests. Loss harvesting is not just about timing . The basis, accounting and substance have to be accurate and defensible. For taxpayers navigating this transition, this is exactly the type of advisory, pre-filing compliance, basis reconstruction and reconciliation work Camuso CPA is built to handle.