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Cryptocurrency Accounting and Audits

The IRS considers cryptocurrency an existential threat to tax compliance and has prioritized audits of cryptocurrency income. However, the IRS’s capacity and understanding of cryptocurrency is limited. Our team of California cryptocurrency lawyers is an industry leader in accounting, reporting, and audit representation for cryptocurrency matters.

Related article: What Causes a Crypto Audit and How to Respond to a Crypto Audit

Cryptocurrency and blockchain technology presents a unique challenge for U.S. taxpayers. Cryptocurrency records are often incomplete. Most trade on a variety of platforms that have their own unique documentation standards. Complicating matters, the IRS guidance is limited. This makes accounting for and reporting cryptocurrency gains and losses extremely difficult.

Now imagine the IRS is auditing your tax return to verify its accuracy. It is a recipe for disaster.

Our team can guide you through this. First, we step in as your representative and interface with the IRS Revenue Agent on your behalf. It is a taxpayer’s right and to their advantage to do so.

We then assess the issues presented by the audit. This begins with identifying its scope and analyzing the information reported on your tax return. We then help compile and organize the supporting documentation.

For missing records or accounting, our CPAs use proprietary, cutting edge software to recreate your activity. The improved documentation helps resolve current questions, prepare for future ones, and has helped make Kugelman Law a standout firm in cryptocurrency cases.

As your California cryptocurrency attorney, we appear at the audit on your behalf. Our goal is to resolve the audit and avoid expansion into other items or tax years. The best way to achieve this is to demonstrate the accuracy of our client’s reports through a collaborative approach which we believe leads to the most efficient resolution.

In the case of an unreasonable audit, we are prepared to guide our clients through the IRS Office of Appeals or U.S. Tax Court.

Another complexity in the world of crypto is many countries outside of the U.S. do not consider it taxable income. Many people who are U.S. taxpayers but from other countries are often shocked to find out they have a huge compliance issue they must address with the U.S.

Common Cryptocurrency Compliance Issues
  • Phantom Like-Kind Exchange: Taxpayer believes they took like-kind exchange but never reported those exchanges with their tax return on IRS Form 8824.
  • Failed to Report Foreign Exchange Accounts: Taxpayer did not report accounts with exchanges located outside of the U.S. (e.g., Binance) on FBARs or Forms 8938.
  • Airdrop, Fork Income: Taxpayer never accounted for or inconsistently reported fork or air drop income.

Ultimately, our goal as attorneys at Kugelman Law is to be your advocate for the most beneficial resolution in your California cryptocurrency matter.

The California cryptocurrency lawyers at Kugelman Law are experienced with cryptocurrency tax reporting and team with a CPA for all crypto accounting needs. Our attorneys have helped hundreds of taxpayers throughout California account and report cryptocurrency gains and losses.

Our tax professionals are experienced with recreating missing trading data and dealing with high volume and complex trading activity. Let our team of experienced California cryptocurrency attorneys and tax professionals bring you into compliance, defend you in your audit, or represent you in a criminal investigation.

Client Reviews
Alexander helped me break down my tax situation and used his expertise to figure out the next actionable steps, make sure that all the bases were covered (that I wasn't aware even existed), and confirm that things were done correctly. If you are confused and stuck in a difficult tax situation, Alexander will guide you forward and help you confidently resolve the issue. Henry Wang
If you are having tax trouble, Alexander is the one to help you. He was very professional, personable, and easy to reach. His explanation of the entire process is helpful for easing the stress that is associated with tax trouble. We never felt intimidated or out of the loop while working with him. The process was handled to our liking and we are satisfied with the results. Even the after care has been phenomenal! Tony W.
If anyone out there is in need of stellar legal tax assistance, look no further and contact Alexander Kugelman. He helped me tremendously with my tax situation and is always there to help when needed. If I can give Alexander more stars, I would because 5 stars is not enough! Thank you for everything, Alex!!! Flo Lauzon
Alexander has been a life saver! I got dragged into some serious IRS issues with a complicated foreign assignment component, which included divorce. Alexander has been working with me to resolve directly with the IRS. Alexander is detail oriented, responsive and I trust him to guide me. I will be using Alexander for all tax related matters from now on! He is stuck with me forever. Eve T.
Alexander helped me understand the IRS audit process and prepared my response. There were certain records that I had lost, but he suggested alternatives that the IRS accepted. Even better, he showed up at the audit for me and I never actually had to talk with the IRS. I didn't have to pay any penalties. I'd definitely recommend hiring Alexander to deal with an IRS issue. L.R.