Cryptocurrency Tax Issues
Digital Assets. Real Taxes.

The IRS treats cryptocurrency as property. When you sell, trade, or spend crypto, you recognize a capital gain or loss based on the difference between your cost basis and the fair market value at the time of disposal. Short-term gains (held less than one year) are taxed at ordinary income rates. Long-term gains are taxed at preferential capital gains rates.

Receiving crypto as income — mining, staking, airdrops, payment for services — is taxed as ordinary income at the fair market value when received.

DeFi is a tax reporting challenge. Swaps on decentralized exchanges are taxable events. Providing liquidity may be taxable upon entry or exit. Yield farming rewards are likely ordinary income when received. And the IRS has provided almost no specific guidance on many of these activities.

We analyze each DeFi interaction and apply the most defensible tax treatment based on existing guidance, analogous rules, and evolving IRS positions.

The IRS has data from major exchanges (Coinbase, Kraken, etc.) and is actively matching it to tax returns. If you haven't been reporting, the risk of detection is increasing every year. Coming forward voluntarily through amended returns is almost always better than waiting for the IRS to contact you.

We help clients come into compliance with minimized penalties and defensible positions for prior years.

This is the most common crypto tax challenge. We use specialized tools and blockchain analysis to reconstruct transaction histories across exchanges and wallets, establish cost basis for each lot, and apply the most favorable accounting method (specific identification, FIFO, LIFO, or HIFO) to minimize your tax burden.