Introducing Crypto Tax Tools by CryptoTaxAudit

We’ve created Crypto Tax Tools as part of our ongoing mission to help as many crypto owners as possible. See what premiere tutorials are in this toolbox.

The topic of crypto tax can be a scary one, especially with so few resources out there. But it doesn’t have to be. In our ongoing mission to help as many crypto traders as possible, we’ve created Crypto Tax Tools. Think of it as your toolbox if you like, powerfully aiding you in being proactive to file a great crypto tax return. Just how helpful can they be? 

Learn about our premiere video tutorials that are now available, and at a discounted price for members of CryptoTaxAudit.

Consider The Cost of A Bad Crypto Tax Return

Our Crypto Tax Tools are designed to save you money. The video tutorials provided can keep you from having to hire a tax attorney, whose rates range anywhere from $225 to $500 per hour. You’ll find that the vast majority of tax attorneys aren’t even knowledgable about cryptocurrencies and don’t deal with crypto taxes and foreign reporting obligations.

READ MORE: Responding to an IRS Letter of Audit or Examination – What’s Involved

Most important of all, a properly filed crypto tax return can save you the $10,000 penalty fee for not filing the FBAR and other anti-money laundering forms.

Our Crypto Tax Tools Video For Filing the FBAR and Form 8938

Learn how to correctly file your cryptocurrency on the FBAR and form 8938.

This video explains how to file these essential forms, specifically with cryptocurrency activity in mind. It covers: 

  • the requirements of filing the anti-money laundering forms
  • that crypto exchanges are considered to be foreign bank accounts
  • the penalties and cost at risk
  • if you qualify for filing these forms
  • step-by-step instructions on filling out the forms
  • and more

Our Crypto Tax Tools Video For Using TurboTax To File Crypto Tax

Learn how to use TurboTax to report cryptocurrencies on U.S. income tax return.

This video goes way beyond the basic crypto support of TurboTax to explain how to:

  • report mining income
  • claim tax breaks for losses to scams and lost coins
  • file the two anti-money laundering forms required of all crypto traders
  • use a disclosure statement to protect against audits
  • and more

These two video tutorials are just the beginning. Over time, we’ll be adding even more powerful crypto tax tools, from videos to ebooks, and more.

Crypto Tax Tools + CryptoTaxAudit

These videos are prepared by myself, Clinton Donnelly, founder of Donnelly Tax Law and CryptoTaxAudit. I’m one of the leaders in the field of crypto tax reporting and defense and have prepared hundreds of crypto tax returns.

READ MORE: Introducing Crypto Audit Defense with CryptoTaxAudit

On top of saving money with our Crypto Tax Tools, you can have peace of mind when you subscribe to CryptoTaxAudit. As a member, you’ll be protected against crypto tax audits and have access to free resources and ongoing discounted pricing of our Crypto Tax Tools. 

Now as a crypto owner, you can rest assured that you’re safe. 

Get Our Newsletter

Get my bi-weekly newsletter with helpful tax resources and keep us at hand in case you ever need our help.
You’ll also receive a special discount code for signing up!

Crypto Taxes 2020 – Interview Video with Ivan on Tech

In my interview video with Ivan on Tech, we discuss crypto taxes in 2020. From regulation changes to foreign filing and more, tune in crypto owners.

Taxes in general are a serious topic that is important to handle correctly. Now for crypto traders, it’s become even more serious. Cryptocurrency is becoming a larger presence in our world and with that, more clarity is coming about regarding regulations and especially cryptocurrency taxation. I talk about this and more in my interview video with Ivan on Tech. 

Crypto Taxes 2020 Overview

In this recent interview video with Ivan on Tech, we talk about:

  • the latest regulation changes for US crypto tax reporting
  • foreign filing obligations
  • how the IRS thinks and will go after crypto traders
  • crypto reporting tools
  • crypto audit protection
  • true-life stories and examples
  • and more

A Sneak Peek of Crypto Taxes 2020 Interview Video

crypto tax return

IVAN: What kind of news is the latest when it comes to US crypto tax reporting?

CLINTON: There is now a question about cryptocurrency on the US tax form 1040 that every tax payer has to answer. It ask, “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?“.

Everybody has to answer that, which is significant because when you sign a tax return, it’s signed with an oath that is under penalty of perjury. Answer that incorrectly and you’re committing a felony. 

IVAN: Should everyone with crypto be concerned with the tax authorities? 

CLINTON: Yes. The IRS considers crypto traders to be low-hanging fruit. It’s a branch of the government that wants to make money. 

GET MY EBOOK: Why Crypto Traders Are Low-Hanging Fruit For The IRS

Watch Crypto Taxes 2020 Interview With Ivan On Tech

For help with your crypto taxes, schedule a consultation today.

To learn more about our latest crypto tax service visit

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Introducing Crypto Audit Defense with CryptoTaxAudit

The best investment any crypto owner can make is in our new crypto audit defense service, CryptoTaxAudit. Learn more today to protect yourself all year!

You’ve most likely heard of audit defense services, but what about crypto audit defense? The area of taxes regarding cryptocurrencies has been a confusing and stressful experience for crypto traders. More guidance has finally been coming out, but this also means more crack-down is soon to follow. During the year 2020, the IRS is expected to begin examining and auditing tax returns by crypto traders. So how should you be prepared as a crypto trader? There’s now a solution that provides crypto audit defense, our new service CryptoTaxAudit

Why You Need A Crypto Audit Defense Service

crypto audit defense

As a crypto trader you need special protection. Traditional audit defense services from companies like TurboTax, TaxACT, and H&R Block are inadequate coverage for crypto owners. They don’t have expertise in defending crypto returns. They only cover a specific year’s return, protect you for only three years instead of the needed six years, and don’t defend the anti-money laundering forms.

Our audit defense service provides the expert protection that you need as a crypto trader. 

  • We have expertise in defending crypto returns.
  • We protect the anti-money laundering forms.
  • Our protection covers returns from any year, not just a specific year’s returns.
  • We protect you for all six years that are needed.
  • While other services are reactive we’re proactive and include tools like our Crypto Tax Health Check for free so you reduce your chances of getting an IRS letter in the first place. 

We also offer Small Business Crypto Audit Defense, the audit protection designed for crypto businesses. 

How Does Our Crypto Audit Defense Work?

crypto audit defense

Photo by Helloquence on Unsplash

By paying a small annual subscription fee, you’re a member of CryptoTaxAudit. This means that we defend you in any IRS examination of your crypto activity that you receive notice of. 

While a member, if you get a letter from the IRS, you pay a small fee for the initial consultation call on that case. Then any further work we do on that case is at no charge, including: 

  • developing a strategy with you
  • drafting written responses
  • escalating IRS management
  • researching laws
  • communicating with the IRS
  • updating you on the progress
  • and more…

The Crypto Audit Defense That Will Truly Protect You

We’re committed to helping as many crypto owners as possible with their tax responsibilities. It’s a new and evolving technology but doesn’t have to be stressful and costly for you. 

Even if you’ve received a letter from the IRS but don’t have a membership with CryptoTaxAudit, we can still help you with crypto audit representation

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You’ll also receive a special discount code for signing up!

Responding to an IRS Letter of Audit or Examination – What’s Involved

Even the possibility of getting an IRS letter can cause alarm, especially for crypto traders. But rather than worry, learn what’s involved and be prepared.

You open your mailbox and there’s an IRS letter asking about your crypto tax return. To respond to the audit, what work needs to be done and by who? It can be easy to panic and feel alarmed, but the best thing you can do first is to understand the process and your options.

What To Know If You Get an IRS Letter

IRS letter

To understand what’s involved, and how best you can respond, I’m going to tell you about the five main activities during an examination of crypto transactions and records.

  • Substantiation is the producing of receipts, records, and evidence of any income or expenses under question. It includes gathering all exchange transaction records and off-exchange transactions related to cryptos. Only the taxpayer knows where these records are, so collecting them is their responsibility.
  • Accounting involves summarizing taxpayer records into tax reporting categories or forms. It is a taxpayer’s responsibility, but this work can be hired out. An example of this is using a crypto-capital gains calculation service to analyze transaction records to generate a list of gains. It is a complicated activity and critical to documenting the gains for the IRS.
  • Reporting involves preparing or amending tax returns to report income and expenses or anti-money laundering forms. During an IRS examination or audit of crypto reporting, this work is done by Crypto Tax Audit at no charge for its subscribers; otherwise, Crypto Tax Audit will provide this at a reasonable fee.
  • Representation is the strategizing and responding to tax authorities. It involves communicating with the IRS or tax authorities on the taxpayer’s behalf whether in writing or verbally, on all matters. This includes responding to letters, negotiating fast track mediation or settlement, negotiating with IRS Appeals office, requesting abatement, preparing taxpayer financial statements, applying for Currently Non-Collectable status or preparing Offers-In-Compromise petitions, keeping the taxpayer updated, and performing all other taxpayer dispute and collection options available in the tax code or Internal Revenue Manual.

For crypto-related examinations and audits, Crypto Tax Audit performs these services at no charge for its subscribers; otherwise, Crypto Tax Audit performs these services for a reasonable fee.

  • Controversy is the term used to describe when a taxpayer and the IRS disagree on how a matter should be treated under the tax laws and regulations. It is a significant activity because all crypto-related transactions are new and stretch how laws and regulations are interpreted. Controversy work requires legal training because it involves statutory interpretation and analysis of prior court cases, IRS rulings, and commentary from the congressional Joint Committee on Taxation. For crypto-related examinations and audits, Crypto Tax Audit does this work at no charge to its subscribers. This is an area of significant interest and investigation by Crypto Tax Audit to prevent the most persuasive arguments during IRS representation.
  • Litigation is needed when all efforts at escalation, appeals, and use of the tax advocate service do not provide a satisfactory result. A case can be taken to US Tax Court or Federal District Courts. A fresh legal case is prepared for arguing the tax controversy before a judge. Less than 4,000 cases per year are heard because the IRS uses its Appeals group to settle cases out of court if possible. While taxpayers can represent themselves at tax court, hiring an experienced tax litigation lawyer will increase the chances of winning. Paying for a lawyer is the taxpayer’s responsibility. Crypto Tax Audit will assist subscribers at no charge on crypto-related litigation efforts.

Read More: Latest Release of IRS Crypto Tax Information – Interview with Brad Kimes on XRP

What Can an IRS Letter Entail?

IRS letter

Photo by Kelly Sikkema on Unsplash

Not all matters require all these skill areas. Often the cost is the driving consideration.

If your IRS letter is about collecting on a debt that is not disputed, then representation service is all that a taxpayer needs.

If your IRS letter is questioning the math on a return or the omission of reporting, then usually representation and sometimes reporting services are needed.

If your IRS letter is about a formal examination or audit, then more work may be needed. Substantiation, possibly bookkeeping, reporting, representation, and controversy work are needed.

Learn More: Our Services

Protect Yourself in the Case of an IRS Letter

As a service of Donnelly Tax Law, a Crypto Tax Audit annual subscription can ensure the best protection against crypto tax risks.

It’s the proactive way to have peace of mind and know you’re protected regarding your crypto taxes.

To learn more, visit CryptoTaxAudit.com

Feature image by Kelly Sikkema on Unsplash

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IRS Bluff About Crypto Like-Kind Exchange Backfired

A recent IRS bluff about like-kind exchange for crypto not only backfired, but also showed their true stance on the treatment. And it could benefit you.

This month, an IRS faux pax caused them to reveal their true position on like-kind exchange treatment for cryptocurrencies. Like-kind exchange treatment, Section 1031, eliminated tax on crypto-to-crypto trades prior to 2018. This was a treatment most taxpayers assumed.

Recent Statements About Like-Kind Exchange

At a November 2019 annual national convention of CPAs (AICPA), two guest speakers were associate lawyers at the IRS Office of Chief Counsel. This is the office responsible for all IRS court cases and formulating formal legal opinions by the IRS. One of the lawyers was the author of a recent IRS Revenue Ruling on the treatment of cryptocurrency hard forks and airdrops.

In a Q&A session at the conference, she stated that the Chief Counsel’s office didn’t believe that crypto-to-crypto trades were eligible for like-kind exchange treatment. Never before had the IRS stated any official position on this topic. Immediately, crypto news services broadcasted her comments as the official position of the IRS causing many taxpayers to become alarmed.

like-kind exchange

The Official Stance On Like-Kind Exchange

Within a week, an official spokesperson from the IRS Office of Chief Counsel announced that her comments were not the official position of the IRS. He further explained that the IRS would consider the use of like-kind exchange on a case-by-case basis. All audit cases are handled on a case-by-case basis, therefore, like-kind exchange for cryptos is not a position the IRS is automatically going to attack unless it is reported incorrectly on a case.

She was one of the key lawyers formulating the IRS’s crypto position. She was in a position to clearly know the management position on how to treat like-kind exchange. Her bluff backfired when management had to deny her statement.

This poor bluff forced IRS management to show their hand. It exposed the real IRS position on like-kind exchange for cryptocurrencies. They are not willing to prosecute a case where like-kind exchange is properly reported.

Read More: Biggest IRS Crypto Tax Guidance and What it Means for Crypto Traders

like-kind-exchange

Photo by Dmitry Demidko on Unsplash

The Bad News and Good News About Like-Kind Exchange

This is good and bad news. This was good news for crypto traders who assumed like-kind exchange treatment was valid. This is bad news because most of these traders assumed they didn’t have to report the trades on their return. This was a mistake. If they didn’t report these trades on Form 8824, they can’t claim like-kind exchange treatment. The IRS would be correct to deny those traders like-kind exchange treatment and subject them large penalties for failing to report income.

From the legal research we have done at Donnelly Tax Law and CryptoTaxAudit, we believe the case for like-kind exchange is quite strong. I believe the case is so strong that the IRS Chief Counsel’s office persuaded the Congress’ Joint Committee on Taxation to change the law to limit like-kind exchange to real estate. Had they not done this, crypto traders would have kept their investments always in crypto and never in fiat, so that they would never have to pay taxes on that money again.

So, this bungled bluff should be an encouragement to traders to amend their 2017 returns to claim like-kind exchange treatment if it would save them significant taxes owed. Those traders who are on the fence as to whether the IRS would contest or not should also be encouraged to claim this option.

©2019

Featured image by André François McKenzie on Unsplash

Want to amend a return?

Here at Donnelly Tax Law we specialize in amending returns specifically dealing with cryptocurrencies and applying the like-kind exchange treatment if it’s beneficial for you (applicable for 2017 and prior years). Schedule a consultation with us to learn more. 

Would you rather do it yourself? Consider our Crypto Tax Fixer Package >> 

Benefit from our other resourceful ebooks:

Basics of Crypto Taxes

Download NOW: Crypto Tax Health Check

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Biggest IRS Crypto Tax Guidance and What it Means for Crypto Traders

The IRS’s recent release of crypto tax guidance heralds major changes for all US taxpayers. Make sure to learn what it means for you as a crypto trader.

In early October, the IRS made its biggest release of crypto tax guidance in the past five years. And it heralds a massive change in how crypto traders report their cryptocurrency income.

The New Crypto Tax Guidance

The IRS has published an early release of the 2019 version of Schedule 1 of Form 1040. The schedule now starts with the following new question,

"At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?"

A yes or no answer is required. (The IRS defines cryptocurrencies as virtual currencies.)

This question requires all taxpayers to admit if they dabbled with cryptos during 2019.

Once a taxpayer checks this box, they are added to the list of known crypto traders for whom the IRS intends extra scrutiny.

Checking Yes to Crypto Tax

crypto tax

Photo by Julian Lozano on Unsplash.

So let’s say you check yes in 2019. What are the implications?

First, if you sold or exchanged cryptos in 2019, you must list your capital gains from those transactions. When listing a coin sold, you have to state the purchase date. If that date happens to be in a prior year, it begs the question, “did you accurately report your cryptos in that year?”.

Smart traders would go back and amend those prior year returns before the IRS finds out.

Checking No to Crypto Tax

crypto tax

Photo by Gemma Evans on Unsplash.

What are the implications of a crypto trader checking no?

When you sign a tax return, you are signing a statement that says under penalty of perjury, this return is true, correct and complete. Wrongly checking no would be a felony subject to fines or imprisonment.

This new Schedule 1 will cause all U.S. crypto traders to come out of the closet or permanently hide.

Need Crypto Tax Guidance?

To best learn how we can help you, let’s find out where your crypto taxes are at. Take our Crypto Tax Health Check (download below) and visit our store to benefit from my other ebooks. 

Do you already know that you need our crypto tax services? Check out our Full-Service Crypto Tax Package or our do-it-yourself Crypto Tax Fixer Package.

Featured image by André François McKenzie on Unsplash.

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Get my bi-weekly newsletter with helpful tax resources and keep us at hand in case you ever need our help.
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Latest Release of IRS Crypto Tax Information – Interview with Brad Kimes on XRP

We’ve just had the biggest release of IRS crypto tax information in the past five years. Here’s what to know and how to be prepared as a crypto trader.

This week has been the biggest release of IRS crypto tax information in the past five years. What is going on and what does this mean for you as a crypto trader?

I discuss this big news, and answer important questions it brings up, in my latest interview with Brad Kimes of XRP. If you haven’t already, watch the interview now. 

What Comes Next?

Over the next month, I’ll be writing more in-depth about this latest IRS crypto tax information and what you can do to be prepared as a crypto trader. 

In the meantime, subscribe to my newsletter to be notified of that and other important information regarding US crypto taxes. 

And get a 50% discount code for signing up. 

Beyond IRS Crypto Tax Information

Dealing with crypto taxes requires more than a regular tax accountant. It requires legal expertise about the US tax regulations. That’s why I have a law degree specializing in the international laws of financial regulation including taxation. I’m also an Enrolled Agent

With this background, I’ve written several books that can help you with your crypto taxes.