Clinton Donnelly

🚨 BREAKING: IRS SCANDAL EXPOSED 🚨 You’re not going to believe this. Sen. Joni Ernst has revealed that IRS EMPLOYEES OWE ~$50,000,000 IN UNPAID TAXES. Yes. The people who enforce the tax laws… aren’t paying them. Let that sink in. Nearly 6,000 IRS employees, almost 10% of the agency, have significant unpaid tax balances. Average amount owed? About $8,000 per employee. These are not recent bills. Many are from prior years. Some didn’t even file. This isn’t a clerical issue. It’s a credibility crisis. These employees know exactly how the system works, what gets flagged, what doesn’t, and where enforcement is weak. That’s not just hypocrisy. That’s tax fraud risk inside the tax authority itself. So here’s the real question: Should Scott Bessent put IRS employees with unpaid taxes on probation, just like any other federal worker? Because, if the IRS won’t enforce the rules on itself, why should the public trust enforcement at all? Curious what you think. Please comment and hare.

@CryptoTaxAudit @CenseAG You don't want to miss this one!

RT @CryptoTaxAudit: 🚨 Cashing out crypto soon? Don’t trigger an IRS headache or bank freezes. Join our LIVE AMA 📅 March 23 | 2PM ET Clin…

A lot of crypto investors assume the exchange handles all their taxes because of Form 1099-DA. That’s not the case. With the new form, many exchanges, including Coinbase, will report the sale price, what’s called the proceeds, but they won’t report the cost basis. That part is still the investor’s responsibility. So in simple terms, what is cost basis in cryptocurrency? Cost basis is the price you originally paid for the asset you sold. For example, let’s say you bought $eth for $10,000. Later, you exchange that Ethereum for $sol when its value has increased to $12,000. Your cost basis is still the $10,000 you originally paid. The term “cost basis” can sound confusing, but it’s actually straightforward. In accounting, the core word is “basis,” which simply means the starting value of the asset. The word “cost” is added to make it clear that we’re talking about what you paid for it.

The Senate Finance Committee, which oversees the IRS, has put forward a bipartisan bill to make a number of administrative changes to how the IRS operates. Many of these changes are designed to make life easier for taxpayers, reduce unnecessary burdens, and give people more time to respond. There are also a range of smaller improvements included. Overall, I think they’re very positive. One thing I particularly like is that they’re planning to crack down on invalid or unlicensed tax preparers. This is a major issue in the U.S. Right now, tax preparers are not required to be licensed, but if someone is preparing tax returns, they should have a current level of knowledge and competence. The problem is, there are no real requirements for this, and that gap is being exploited. You see cases where bad actors, including overseas fraud rings, file large volumes of fraudulent returns. They may have someone’s Social Security number and a few details, and that’s enough for them to attempt fraud. There’s often no effective way to validate who is actually preparing the return. These are what we call “ghost preparers” people who prepare returns but aren’t properly registered or accountable. This reform is long overdue. If you take your car to be repaired, you expect the mechanic to be qualified. Not just someone who says they can do the job, but someone who has demonstrated the knowledge to do it properly. The same standard should apply here. So overall, there are a lot of strong improvements in this bill. That said, there’s a major issue. The IRS doesn’t have the funding to implement many of these changes. Budget cuts and staffing freezes have left the agency stretched thin. Many of these proposals rely on upgrades to systems and personnel, particularly in IT, and those areas are currently under-resourced. Some core capabilities have already been reduced. So while I’d like to see the bill passed, and I think it contains a lot of good ideas, the reality is that without proper funding, many of these improvements may never actually be implemented.

@ArbazCryptoTax You're welcome!

@CryptoTaxFixer Thank you!

1099-DAs are confusing because they’re new. Many people simply don’t know how they work yet. It’s not just taxpayers who are confused. Tax preparers are also confused because they’ve never seen these forms before. Many of them aren’t familiar with crypto reporting, and frankly, some are nervous about dealing with it. My concern is that some people may choose not to report the 1099-DA information at all. That’s a huge mistake. When you file your tax return, there is metadata attached to that return. You don’t see it, but it includes a list of all the 1099 forms that were entered and reported on your tax return. The IRS takes that list and compares it to the 1099 forms they received about you from other sources. If one of those forms is missing, it suggests that you may not have reported all of your income. When that happens, the IRS will contact you. How do they contact you? Usually through a computer-generated notice called a CP2000. CP stands for “Computer Paragraph,” and the number 2000 appears at the top of the letter. The notice essentially says: “Hey, we think you forgot to report some income. Based on the information we received, we calculated the additional tax you owe. Please pay this amount, or explain why you don’t owe it.” That’s what a CP2000 letter is. You typically have about 60 days to respond. For many people, it can feel intimidating and overwhelming. If you fail to respond, the IRS will move forward with billing the amount they believe you owe. At that point, things escalate quickly and the process becomes much more difficult. That’s why it’s important to make sure all of your 1099 forms are entered into your tax software, or that your accountant includes them when preparing your return. The goal is to ensure everything is accounted for so the IRS’s internal matching system doesn’t trigger a computer-generated audit. In other words, don’t end up with a CP2000 letter because your tax preparer was sloppy.

That’s exactly right, and it’s one of the biggest traps in this whole rollout. The 1099-DA is often reporting proceeds without full cost basis, especially when assets have moved across exchanges or wallets. The receiving platform doesn’t have that historical data, so it shows up incomplete. From the IRS matching perspective, that can look like full gain if it’s not handled properly. That’s why reconciliation matters. You don’t just take the form at face value. You reconstruct the cost basis across the full transaction history and report the correct gain or loss on the return. Otherwise, you end up either overpaying tax or getting pulled into a notice trying to explain the difference later. This is exactly where people get into trouble if they rely on the form alone. I enjoyed your article.

The part most people are going to miss is the cost basis gap. Your 1099-DA shows what you sold for, but if you ever transferred crypto between exchanges, the receiving exchange has no idea what you paid. So the IRS sees proceeds with no basis, and their system treats that as pure profit. We wrote a walkthrough on exactly this: what the 1099-DA actually reports, why cost basis is blank, and what to do before filing. cryptofolio.ai/blog/1099-da-c…

That’s exactly what’s happening. The 1099-DA isn’t just a form, it’s a stress test. It’s exposing who actually has a process for handling crypto end-to-end, and who was relying on partial data or making assumptions. The ones with real workflows can absorb this. The rest are either stepping back or referring it out. And, you’re right about capacity. As more taxpayers receive these forms, demand is going to concentrate quickly around the firms that can actually handle reconciliation properly. That gap is only going to widen from here.

@CryptoTaxFixer @MustardPat1 Exactly right. 1099-DA is the filter. Preparers who built real workflows will absorb the overflow. Those who were winging it are already referring out. I'm seeing a lot of that happening right now. Capacity is about to concentrate fast.

@TaxesLinda @CryptoTaxAudit Thanks for your support!

@CryptoTaxFixer @CryptoTaxAudit You guys are the best !

That’s fair, crypto itself isn’t new. But 1099-DA is. What’s changed is the level of reporting and how that information is now being shared directly with the IRS. Before this, a lot of crypto reporting relied on what the taxpayer provided. Now there’s a third-party record feeding into the IRS matching system. If your forms from Robinhood or Uphold are clean, that’s a good sign. Some platforms are doing a better job than others. Where we’re still seeing issues is with multi-wallet setups, transfers between platforms, DeFi activity, and older transaction history. That’s where the reporting gaps tend to show up. So for simpler setups, it may feel straightforward. For anything beyond that, the complexity is still very real.

@CryptoTaxFixer If you have been investing or trading crypto since 2017, it's not new..only for those who have never report tax for crypto or super newbies. My 1099-DA from Robinhood, Uphold were very clean.

That’s a fair point. When you hire a CPA, the expectation is that they know how to handle your situation properly. That’s the standard. The issue right now is that crypto has moved faster than the traditional tax industry. A lot of CPAs were never trained on this, and 1099-DA is forcing that gap into the open. So what you’re seeing isn’t taxpayers failing. It’s a capability gap. Some professionals have taken the time to understand crypto reporting properly. Others haven’t, and they’re either guessing or stepping away. At the end of the day, responsibility still sits with the taxpayer, but that doesn’t mean you should have to figure it out alone. It just means choosing someone who actually knows how to handle crypto

@CryptoTaxFixer Hard to know when the whole point of paying you people is because its YOUR JOB to know. Most of us use a CPA because they are suppose to know wtf is going on and whats required.

You’re describing one of the biggest pain points in crypto reporting right now. The cost basis isn’t actually erased, it’s just no longer tracked by the exchange once the assets leave their platform. From that point on, it becomes your responsibility to maintain that history across wallets. That’s where things break down. Different wallets, unsupported integrations, custom CSV formats, and inconsistent data all make it difficult to reconstruct a clean transaction history. And you’re right, even some software and tax firms struggle to get this right. But from the IRS perspective, the expectation hasn’t changed. They still expect a complete and accurate report, regardless of how fragmented the data is.

The biggest problem is once you send your coins off the exchange to your ledger or wherever, the cost basis is totally erased. So then you add your ledger wallet addresses and you need csvs for the ones that arent supported. The tax software co requires specially created csv's and the tax company themselves cant even do it correct. How is the tax payer supposed to figure it out. Rediculous set up.

Yes, those transactions still need to be reported. The 1099-DA is not the source of truth. It’s just one data point the IRS uses in its matching system. Your tax return is supposed to reflect your actual activity, not just what shows up on a form. If transactions are missing from the 1099-DA, you still report them based on your full records. Otherwise, you’re understating your activity, which can create a different kind of problem down the line.

If proceeds are underreported on tax forms, it’s clear that taxpayers may receive a CP2000 notice. However, what happens when a taxpayer has more transactions or higher proceeds than what’s reported on the 1099-DA? I was waiting for Kraken to begin issuing Form 1099-DA, and interestingly, for one client, some sales transactions are missing from the form. In such a case, should those unreported transactions still be included when filing the tax return?

I get the frustration. The challenge is that 1099-DA is brand new, and a lot of these platforms are still trying to figure out how to generate accurate reports. The data behind crypto transactions isn’t always clean or complete. That said, delayed or incorrect forms create real problems for taxpayers. People are trying to file correctly, and they’re relying on information that may be late or inaccurate. What matters most right now is making sure you don’t rely blindly on any single form. Even when a 1099-DA is issued, it still needs to be reviewed and reconciled against your actual transaction history. That’s where most of the real issues show up.

@CryptoTaxFixer We need massive fines for companies who fail to issue them on time!

I get the frustration. The challenge is that 1099-DA is brand new, and a lot of these platforms are still trying to figure out how to generate accurate reports. The data behind crypto transactions isn’t always clean or complete. That said, delayed or incorrect forms create real problems for taxpayers. People are trying to file correctly, and they’re relying on information that may be late or inaccurate. What matters most right now is making sure you don’t rely blindly on any single form. Even when a 1099-DA is issued, it still needs to be reviewed and reconciled against your actual transaction history. That’s where most of the real issues show up.

I get the frustration. The challenge is that 1099-DA is brand new, and a lot of these platforms are still trying to figure out how to generate accurate reports. The data behind crypto transactions isn’t always clean or complete. That said, delayed or incorrect forms create real problems for taxpayers. People are trying to file correctly, and they’re relying on information that may be late or inaccurate. What matters most right now is making sure you don’t rely blindly on any single form. Even when a 1099-DA is issued, it still needs to be reviewed and reconciled against your actual transaction history. That’s where most of the real issues show up.

@MoneysNotNeeded Sure! Thank you for your suggestions. Not forgetting about your "fair tax" comment. I will record my opinion for you.

@CryptoTaxFixer Can you touch on IDR requests? The battle between keeping the audit focused on the tax year revenant, vs their request/requirements to provide any and all past transactions. Potentially opening up a can of worms... Thanks!

Over in Europe, around the year 2000 or so, many countries implemented wealth taxes. But, they eventually realized it was almost impossible to collect them. Why? Because determining someone’s total wealth is incredibly difficult. It took teams of accountants digging through financial records just to estimate what someone owned so a tax could be imposed. In the end, wealthy individuals found ways around the tax. There are always legal loopholes and structural ways to move or value assets differently. Governments discovered that enforcing the wealth tax was costing so much money that it wasn’t even bringing in additional revenue. As a result, almost all of those countries abandoned their wealth taxes. More recently, the Netherlands attempted to implement a form of wealth taxation and faced significant pushback. Here’s the fundamental problem with a wealth tax. A 5% wealth tax is essentially a tax on unrealized capital gains, and it’s applied year after year after year. You might say, “Well, it’s only for billionaires.” But that threshold can always be lowered. The issue is the same regardless of where the line is drawn. After five years, you’ve effectively taxed 25% of someone’s assets. After ten years, you’ve taxed 50%. It doesn’t take long to see the problem. A wealth tax quickly becomes a wealth destruction tax. There’s nothing to be gained from it. Instead of trying to tax wealth in this way, the better question is why the government doesn’t focus on reducing its own role in certain areas so the overall cost to taxpayers is lower.

@SouthernFitLife Greatly appreciated. Thank you!

@CryptoTaxFixer Thanks, great post. Passing this on to my followers too.

@CryptoTaxAudit There is no second best!

@CryptoTaxFixer We handle your crypto gain calculations from start to finish. We prepare the numbers accurately, defensibly, and in line with IRS expectations. The result is reporting that keeps you compliant and minimizes unnecessary tax.

@WTFnition @CryptoTaxAudit That’s exactly how it should feel. When this is handled properly, it takes the stress off your plate because you know everything is being reported the right way. Thanks for your support!

@CryptoTaxFixer @CryptoTaxAudit Glad to have your team taking care of this for me. Less stress

That doesn’t surprise me at all. What you’re seeing is a split happening in real time. There are tax preparers who understand crypto, and there are those who don’t. The ones who don’t are stepping back now that the reporting is becoming more formal with 1099-DA. From their perspective, it’s risk. If they don’t understand how to reconcile wallets, transfers, and cost basis, they’re exposed. So rather than get it wrong, they’re choosing not to take it on. From your friend’s perspective, it feels like being dropped. But in a way, it’s also a warning sign. If a CPA isn’t comfortable handling crypto now, it means they likely weren’t handling it correctly before either. The reality is this. Crypto reporting isn’t going away, and 1099-DA is just the beginning. It’s forcing a higher standard. Your friend doesn’t just need a new CPA. He needs someone who actually understands how crypto transactions flow, how to match the 1099-DA properly, and how to report it without triggering IRS issues. Otherwise, that’s exactly how people end up dealing with notices later on.

@CryptoTaxFixer A friend of mine has been working with his CPA for several years now. This year he turned around and told him that he will need to find a new CPA as he will not file his crypto for him this year because of the 1099-DA My friend was gobsmacked