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Frequently Asked Questions

This page provides a list of common questions about CryptoTaxAudit.
If you have a question that is not answered here, please contact us.

How does it work?

When you sign up for a monthly membership, you will complete a membership agreement and an IRS Authorization Form (Form 2848). This form authorizes the IRS to communicate with us. The IRS takes several weeks to process the form. Once we obtain your account and transcript information, you will be notified that weekly monitoring has begun. Members at the Transcript and Audit Defense Membership levels will get an initial summary report of their IRS accounts.

 

What should I do if I get a letter from the IRS?

If you need help understanding the letter or if the letter is an audit notice, upload a copy of the letter (all pages) and a copy of the tax return under question (all pages) to the ShareFile account we created for you when you signed up.

Then log in to your account to submit a request for your audit strategy consultation. Our client manager will review the documents you provided and will contact you to schedule a consultation with our tax professionals.

If you are not a member, please click here to schedule a call to get a quote for our Crypto Audit Representation. We will then be in touch with instructions on how to upload to our secure file system a copy of the letter you received and a copy of the tax return under question.

We strongly advise against talking to the tax authorities directly. They record every conversation. What you say can be used against you.

 

Can you help if the IRS letter is not about cryptos?

Yes, our parent company, Donnelly Tax Law, resolves all types of examinations and audits. We also handle debt collection issues, including installment agreements and offers in compromise. Click here to schedule a consultation call at Donnelly Tax Law.

 

Should I wait until my tax return is done before buying CryptoTaxAudit?

No. You can buy a membership now to protect your prior returns. When you do file your current return, it will automatically be covered by CryptoTaxAudit.

 

How is CryptoTaxAudit superior to TurboTax’s TaxAudit?

TurboTax’s TaxAudit claims no expertise with cryptocurrency reporting. For $49.99, they provide coverage of one return for three years, which is the “typical statute of limitations”. But crypto returns need coverage for six years. CryptoTaxAudit covers all tax returns from any year subject to examination. Finally, TurboTax’s TaxAudit doesn’t do anything until the IRS audit letter is received. CryptoTaxAudit contacts you once an audit flag occurs which is months before the audit. For Audit Defense Members, the audit defense of your crypto tax return is at no charge.

 

How is CryptoTaxAudit superior to ProtectionPlus?

ProtectionPlus is an audit defense plan recommended by TaxACT and by accountants using certain professional tax software packages. ProtectionPlus is an audit defense service. Their services are paid by the hour. They claim no expertise in cryptos. ProtectionPlus doesn’t protect amended returns or FBAR forms. They don’t do anything until the IRS audit letter is received.

CryptoTaxAudit contacts you once an audit flag occurs which is months before the audit.CryptoTaxAudit provides resources to repair poor returns before the IRS contacts you. For Audit Defense Members, the audit defense of your crypto tax return is at no charge.

 

How is CryptoTaxAudit superior to H&R Block’s Peace of Mind Extended Service Plan?

H&R Block’s Peace of Mind Extended Service Plan only covers IRS representation if they make a mistake. It’s about their peace of mind, not yours. Tax software rarely makes mistakes. It’s the taxpayer or tax preparer that supplies incorrect information that causes mistakes. Garbage in; garbage out. They don’t defend you if they’re not at fault on the return. They claim no expertise in cryptocurrency reporting and they don’t defend the FBAR form.

CryptoTaxAudit covers all tax returns from any year subject to examination. Finally, they don’t do anything until the IRS audit letter is received.

CryptoTaxAudit contacts you once an audit flag occurs which is months before the audit.

CryptoTaxAudit provides resources to repair poor returns before the IRS contacts you. For Audit Defense Members, the audit defense of your crypto tax return is at no charge.

 

Why is the statute of limitations six years on crypto tax returns and not just three years?

Under the Internal Revenue Code 6038D(b)(2)(B), a crypto-to-crypto trade is very likely to be a specified foreign financial transaction that must be reported on Form 8938. When you exchange a cryptocurrency with an anonymous person, you can not assume the other person is an American taxpayer.

Per the Internal Revenue manual 25.6.1.9.5.3, a tax may be assessed within six years after the original return was filed (IRC 6501(e)) if the taxpayer omits more than $5,000 in income attributable to foreign financial assets required to be reported on Form 8938.

 

Can you defend my return if I claimed like-kind exchange treatment for my cryptos?

Yes. We have done the legal research and have built the legal case supporting like-kind exchange treatment of cryptos prior to 2018. We feel it is a strong position and we can win if challenged by the IRS.

 

Can you defend my mining income?

Absolutely. Mining income and expenses are reported on Schedule C business income.

 

What is not covered by CryptoTaxAudit?

Read the membership agreement to see a list of what is not covered. The IRS can select to audit a return for many reasons. Once the auditor sees the reporting of cryptocurrency income on the original return or discovers unreported cryptocurrency income, this often becomes the dominant focus of their inquiry.

Most non-crypto related document requests from the auditor can be quickly responded to with no additional charge. But, if the auditor wants to have a deep dive into non-crypto matters, the member will be charged additional costs for labor and contractor costs. The most common contractor cost would be recalculating crypto capital gains when the original calculations are weak.

Here is another example of when additional costs are incurred. One customer paid for all his living expenses using a business credit card from the company he owned. He also transferred company funds into his personal Coinbase account which he later traded for personal gain. The auditor requested proof that every single company expense was business-related and not personal. The Audit Defense Membership would cover the representation of the crypto income and gains. Assisting in documenting and defending all company business expenses was an additional charge.

Additional costs will be identified upfront. Labor rates are at the prevailing rates for tax audit services.

 

Is CryptoTaxAudit an insurance policy that I won’t have to pay the IRS anything?

No. You are responsible for all taxes, interest, and penalties assessed by the tax authorities, not us. We can represent you and put the best tax case before the authorities.

 

What if I’m not a member of CryptoTaxAudit, can you still help me with my IRS crypto letter?

Absolutely. We want to help all crypto traders. During the consultation, we will discuss the fees.

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Thank you for joining us at Donnelly Tax Law (our parent company) and taking the first step toward protecting your crypto tax return from an IRS audit. To ensure our emails don't end up in your spam folder, add info@donnellytaxlaw.com to your safe sender's list.