#731: Fixing Broken Bitcoin Tax Policy with Andrew Gordon

Summary

TFTC: A Bitcoin Podcast — Episode #731
Fixing Broken Bitcoin Tax Policy with Andrew Gordon
Date: March 25, 2026
Host: Marty Bent
Guest: Andrew Gordon, Managing Attorney at Gordon Law Group

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Episode Overview

In this episode, host Marty Bent sits down with Andrew Gordon, a veteran crypto tax attorney and CPA, to dive into the increasingly complex and often fraught world of Bitcoin and crypto taxation in the United States. As tax season looms, they discuss the recent IRS crackdown, sweeping new audit forms threatening perjury, the arrival of 1099-DA, the desperate need for tax code reform and de minimis exemptions, and offer practical advice to Bitcoiners worried about compliance. Andrew also shares his experiences advocating for rational crypto tax policy on Capitol Hill and the prospects for real legislative change.

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Key Discussion Points

1. IRS Crypto Audits & the New Risky Audit Form

• Background: Crypto tax audits are on the rise despite a supposedly “pro-crypto” administration.

• The New Audit Survey: The IRS now sends out a highly detailed, two-page audit form to crypto holders under audit, listing various crypto exchanges and demanding yes/no responses for each, with use dates, all signed under penalty of perjury.

  • Quote [02:33]:

    “This is truly like nothing we’ve seen before... it requires a signature under penalties of perjury. So if you get it wrong, you could be criminally charged.” – Andrew Gordon

• Scope Creep: Unlike typical audits that focus on specific years, this survey casts a wide net over every year of crypto activity, creating retroactive risk.

• Dangers of Honest Mistakes: Honest mistakes or misunderstanding exchange names could still trigger perjury concerns.

  • Quote [04:34]:

    “Those types of things don't exist outside of crypto... You check the box ‘no,’ but really should have been ‘yes.’ Now you’re in trouble.” – Andrew Gordon

2. Navigating a Crypto Tax Audit: What to Do First

• Retain representation immediately – don’t go it alone.
• Attorney-client privilege is vital to assess exposure and strategies.
• Sometimes, it’s possible to negotiate with the IRS to answer questions differently than on the risky form.
  • Quote [06:10]:

    “Number one thing is make sure you have representation... then identify the options based on your actual situation.” – Andrew Gordon

3. The Explosion of Reporting & the 1099-DA Problem

• 1099-DA: As of 2025, U.S. exchanges must send the IRS line-by-line reports of all crypto trades, with an assumed cost basis of zero if none is provided — even if that means erroneous over-taxation.

• Exchanges aren’t equipped to track cost basis because of crypto’s transferability, so taxpayers must calculate and fill in the gaps themselves.

  • Quote [11:38]:

    “If you don’t fill in the cost basis, it assumes zero — which means whatever you sold it for is a complete gain... heavily taxed.” – Andrew Gordon

• Expect an increase in both audits and automatic IRS notices, augmented by AI detection tools.

4. De Minimis Tax Exemption: Why We Need It

• The requirement to meticulously track and report gains/losses on even tiny Bitcoin transactions makes “day-to-day” usage impractical and deters adoption.

  • Quote [13:52]:

    “I had a client ship a banker’s box full of transaction data to the IRS because the file was too large to e-file... It’s absurd.” – Andrew Gordon

• Draft legislation exists (e.g., $5,000 aggregate exemption), but the real pain point is tracking, not just taxation.

5. DC Advocacy: The View from Capitol Hill

• Lawmakers are finally shifting from “what is crypto?” to “how can we legislate to keep crypto in the US?”

• Andrew actively shares real stories with policymakers to influence tax reform discussions.

  • Quote [19:55]:

    “What I’ve seen in DC is a shift to: how can we legislate effectively to make sure crypto stays in the US? That’s incredibly refreshing.” – Andrew Gordon

• Tax policy, clarity, and administrative fairness are becoming bipartisan priorities.

6. Privacy Concerns & Wallet Tracking

• The IRS audit form seeks information on not just exchanges, but also wallets (including self-custody and DeFi), which amplifies privacy concerns.

  • Quote [25:48]:

    “They want to know about wallets, DeFi, even self-custody wallets where there may be no transactions... We have a right to privacy.” – Andrew Gordon

• The move signals an intent to correlate "ownership" with on-chain addresses, raising broader civil liberties issues.

7. Real Audit War Stories

• Even diligent, honest filers are getting caught in disastrous mismatches due to IRS software confusion and lack of crypto understanding.
  • Stablecoin sales mistakenly taxed as full gains due to cost basis “blindness.”
  • One client’s transactions: IRS claimed $75M in gains versus actual, much lower number, all due to misinterpretation.
  • Quote [28:00]:

    “We had to take a case to tax court to argue that stablecoins are pegged to a dollar... It’s absolutely absurd.” – Andrew Gordon

8. Timeline for Audits & Systemic Frustrations

• Crypto audits often stretch from months to years.
• Many in crypto want to pay taxes but fear arbitrary treatment and penalties for honest effort.
  • Quote [32:24]:

    “There hasn’t been a way for people to come forward, know what they owe, pay that tax, and not be afraid...we desperately need that.” – Andrew Gordon

9. The Case for a Voluntary Disclosure Program

• Many people are frozen: e.g., someone who made gains in 2017 hasn’t filed, now fears criminal investigation if they come forward.
• A formal IRS program (like the former Offshore Voluntary Disclosure) could bring billions into the tax base, offer amnesty/less penalty, and help clear up historic confusion.
  • Quote [34:06]:

    “These people want to come forward. There’s been precedent for this in the past. We just need a path forward.” – Andrew Gordon

10. What Triggers IRS Audits?

• No reporting, incomplete (just US exchanges), or major discrepancies with IRS data often provoke audits.
• High transaction counts (even if not large dollar values) can also serve as triggers.
  • Quote [37:37]:

    “The IRS sees the crypto industry as low-hanging fruit... Especially with bitcoin hitting over $100,000, there’s no question in government there’s a lot of money that hasn’t been taxed.” – Andrew Gordon

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Practical Advice for Listeners

Preparing for 2025 Taxes (April 15th Deadline)

• Ensure you have or download your 1099-DA from any US exchange.
• File consistent, accurate returns — do not ignore these forms.
• Use software or pay a professional to reconstruct cost basis and transaction details.
• File an extension if you can’t finish by April 15th; it extends filing (not payment) to October 15th.
• If past years weren’t reported: talk to a professional, calculate statute limits, and strategize submission.
  • Quote [41:03]:

    “The best thing you can do is file an extension right now...then work with a professional to get earlier years caught up and file correctly one time.” – Andrew Gordon

Advocacy: How Can You Help?

• Lawmakers want to hear real stories from ordinary people—share your tax difficulties with Andrew or advocacy groups.
• Ensure crypto tax policy reforms also reflect the needs of smaller investors and everyday users, not just big companies.

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Notable Quotes & Moments

• On the dangerous audit form:
  “I’d never want to be in a dispute with the IRS or DOJ about whether I made an honest mistake. Now you’re already in a problem.” – Andrew Gordon [04:10]

• On reporting every coffee:
  “If I’ve got to have a notepad or app tracking every time I buy a cup of coffee…it pushes away use. It’s backwards.” – Andrew Gordon [13:48]

• On voluntary disclosure:
  “There needs to be a way where crypto investors can come to the IRS, file their old years of taxes...and move on, some assurance you won’t be criminally investigated.” – Andrew Gordon [34:10]

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Timestamps for Important Segments

• [00:36] – Andrew Gordon’s background and overview of current IRS audit practices
• [02:33] – Description of the new detailed IRS crypto audit form and associated risks
• [06:08] – Practical advice for anyone who receives the audit form
• [10:35] – Challenges and consequences of the new 1099-DA reporting regime
• [13:39] – The need for a de minimis tax exemption for routine transactions
• [18:51] – Insights from advocating crypto tax reform on Capitol Hill
• [23:22] – Policy recommendations to fix audit and reporting issues
• [25:47] – Expanding privacy threats with wallet and self-custody interrogation
• [26:38] – Real-world examples of innocents caught up by IRS misinterpretations
• [31:24] – Audit duration & frustrations over IRS enforcement versus real waste
• [33:39] – The case for a voluntary crypto disclosure/amnesty program
• [37:29] – Common triggers for crypto tax audits
• [40:04] – Final practical tax-season advice
• [43:47] – How listeners can support positive crypto tax policy reform

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Tone and Style

The conversation mixes technical insight with approachable, sometimes frustrated, candor. Andrew Gordon is pragmatic and nuanced, advocating compliance but deeply critical of IRS overreach, unfairness, and the chilling effect on day-to-day Bitcoin use. Marty Bent echoes these frustrations and focuses on empowering everyday users with practical knowledge and advocacy opportunities.

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In Summary

This episode is an essential listen (and resource) for anyone navigating U.S. Bitcoin/crypto taxes in 2026, highlighting risks, offering crucial action items, and demystifying what really happens inside these high-stakes IRS audits. It advocates for policy changes—from de minimis exemptions to voluntary disclosure—and calls on the community to make their voices heard in order to fix a broken regulatory system.

Transcript

[A]

You've had a dynamic where money's become freer than free. If you talk about a Fed just gone nuts, all, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for bitcoin. If you're not paying attention, you probably should be. Probably should be. Probably should be.

[B]

Andrew Gordon, welcome to the show, sir.

[A]

Well, thank you for having me. I'm excited to be here.

[B]

I'm excited to have you. And like I was just mentioning, I feel fortunate to get some of your time here at the tail end of March. It is, I'm sure, busy season for you as we approach April 15th. And we're sitting down today to talk about the intersection of bitcoin, crypto and accounting. And for anybody who's listening or watching and is unaware, Andrew is the managing attorney at Gordon Law Group. He has both a JD And a cpa. He's clerked at the IRS Office of Chief Counsel and chaired an IRS fraud trial. And he's been focused on the bitcoin and crypto taxes since 2014, with over a thousand clients served. And you made a bit of a wave a few weeks ago, flagging an audit file or an audit survey that the IRS is sending out to bitcoin and crypto holders when they're being audited. And it's asking for a lot of information and puts potential.

[C]

Puts individuals at potential risk of perjury,

[B]

if I understand correctly. Is that true?

[A]

Yeah. Yeah, that's right. And like you said, Marty, I've been working in crypto tax since 2014, which feels like a lifetime in crypto, although it was only a little over 10 years ago, and although we've got an administration that's very pro crypto, what we've seen over the last couple of years especially is more and more crypto audits. And what we're talking about is most recently the irs. Even though there's all this movement towards regulatory clarity and pro crypto legislation, that the IRS is now using this very extreme form, in fact, a form like nothing I've seen in the last 10 years working in crypto or even just working in IRS audits, that is extremely detailed. Two pages listing out different exchanges, but requiring a yes or a no next to each one, the dates that they're used. But the part that's most concerning about this new form is the potential implications. It requires a signature under penalties of perjury. So if you get it wrong, there could be criminally charged with perjury. And that's just bringing this to a new level, truly like nothing we've seen before.

[B]

And what is it about the particular sort of ask that the IRS is making and the threat of perjury that's different? Is it an extension beyond what they would typically do outside of Bitcoin and crypto?

[A]

Yeah, well, I think one of the first problems is just the scope. Typically, if you're being audited, you're being audited for a specific year, single year, or certain years that they specify and ask for information on those years. This form asks for you to answer about your crypto activity from the beginning of any activity all the way through the end of the audit year. So it's basically opening up a magnifying glass to everything that you've done and potentially expanding that audit into other years by just answering this form. But we've, we've helped clients over the years with IRS audits, even outside crypto auditing their small businesses or just individual tax returns. And typically, if the IRS wants to know what bank accounts you use, they ask you, there's an information document request. They say, identify the bank accounts you've used, not under penalties of perjury. Not a, here's a two page list of every single bank. You tell me what years you've ever used it. Because if you answer that wrong, you make an honest mistake. Now you're in a dispute about your intent. Was that honest mistake or not? Those types of things don't exist outside of crypto. Right. With bank accounts, it's what banks did you use. So in a crypto audit, what they could simply do is ask, which crypto exchanges did you use? Answer that question in writing. That's standard. Having a form like this that has all of these details where if you, you have to check yes or no. Right. It's not. And the problem is confusion. Right. A lot of these different exchanges, they've changed names over the years. The formal name that they're potentially using maybe not even really a name that you even heard of before. So you check the box. No, but really should have been. Yes. And the people online have said, well, look, if it's a unintentional or misunderstanding, then you necessarily commit perjury. Well, I'd never want to be into a dispute with the IRS or the Department of Justice of whether or not I may an honest mistake. Right? You're now already in a problem. So there's just. It's creating all these additional risks for taxpayers where if there's an unfriendly IRS in the future, an administration that doesn't like crypto, wants to weaponize this information. They've got statements, perjury statements, potentially that can be weaponized against the everyday taxpayer.

[B]

So what is the first thing you tell a client when they receive this form? What are like the top, like, you should do this, you should not do this.

[A]

Well, number one, if you haven't retained counsel, you should. People call us all the time, think they could take on the IRS on their own. Some cases maybe you can, but this is not one of them. If you're under audit, crypto related, and especially most of the people we talk to and just last week had someone reach out to us that didn't report crypto on their taxes now being audited or very common, they reported some of it, maybe their US Exchange, maybe parts of it, maybe what they cashed out now being audited. So the number one thing is make sure that you have representation and you have that attorney client privilege to talk through these risks so that they can understand what is the actual exposure. Are there years of unreported income and gains? Did you do your best but you just missed some, or did we just leave it all off? And depending on to begin with, the scope and the potential exposure that drives the strategy on how to respond to this overall responding. One of the options always is just to respond to the irs. Fill out this form as best as you can. But in many cases that is not a preferential option that trying to work out with the IRS a different way to answer the questions, perhaps just directly to an idr, an information document request. There's other ways. So number one is make sure you have representation and then once you have that representation, go through your situation and then identify the options based on that that best fit you. Maybe it's cooperation to some extent, maybe it's no cooperation at all. But it really depends on the risks.

[B]

What's the extent of the amount of people who are being pulled into these types of audits? And I guess the frequency you've been in this for 12 years now, it's been increasing, decreasing, as it depends on the administration.

[A]

What we've seen is a steady increase in IRS audits despite the pro crypto administration, despite the IRS generally having less enforcement, less people. There has been in our experience, a steady increase in crypto audits. And we expect this unfortunately to only increase this year, next year and in coming years because the IRS is getting more information than ever before on US Crypto trading activity. Historically, it has been almost completely up to the taxpayer to report. The IRS will have to issue summons, enter into information sharing agreements to get this kind of Data. Now with 1099da reporting, which started with tax year 2025, all US exchanges are reporting to the IRS all of the trades, all of the sales that occur. So now the IRS is having line by line transaction data of all the sales on US Exchanges. And although one may think that, well, this is just limited to US Exchanges, it now gives them the breadcrumbs to identify the other activity to see the transfers in from your non US Exchanges. There's just so much information that the IRS is going to be receiving that it's what we expect is that there will be not only more audits, but more just IRS notices automatically being sent. There's articles about how the IRS is using now AI to identify people for audits. We expect that that's going to increase, especially with all this new tax reporting that's happening, that the IRS is going to take that information, send notices, send tax bills and audits in coming years.

[B]

Yeah, and the 1099 DA,

[C]

not only

[B]

the exchanges reporting your transactions in a given tax year to the irs, but they have to assume a cost basis of zero. Correct. And so it introduces this problem of maybe being overtaxed because the exchanges are just running with the assumption that you mined Bitcoin when it was first launched in 2009 or something like that.

[A]

Yeah, you're absolutely right. Crypto is unlike anything in the modern financial world, especially when it comes to tax reporting with stocks, other securities, you get this wonderful tax report at the end of the year shows you if you trade it on Robinhood or wherever it may be, you get a tax form, it shows you what you sold, you bought it for your gains or losses, you plug it into TurboTax and away you go. With crypto, that form historically has not existed. It's on us to get all of our transaction data, pay a professional like us, or use a crypto tax software to generate those results. Treasury and the IRS in their infinite wisdom mandated for 2025, a new tax form. Form 1099 DA attempts to solve this problem, but also gives the IRS a lot of information towards enforcement. But the problem with crypto is very few people just buy and sell on one exchange. They're buying on one place, transferring to another, bringing it to their cold Storage, wallet, splitting it in half, there's so much movement. And with that, it's nearly impossible without professional or third party software to trace your cost basis or what you originally bought it for. This new tax form that's being issued this year for tax year 2025, the IRS has required that exchanges report your sales or your sales price or proceeds, what you sold it for, but not your cost basis. In part because the exchanges are struggling to get that data. But the IRS said, well, this year just tell us what, what it was sold for. The problem now is that it's on the taxpayers, it's on all of us to figure it out. Right. Exchange is going to do it, so now we got to do it. Right. The software out there struggles to do it, so we've got to do it. And the IRS is seeing those sale prices and if you don't fill in that cost basis, it's assumed as zero, which means that whatever you sold it for is a complete gain, potentially even a short term gain, which then heavily taxed, paying a substantially amount, substantial amount of tax that you really shouldn't because you don't have that cost basis information.

[B]

Yes. And especially maybe not last year, but this year if the price stays depressed, you're going to want that cost basis so maybe you can report a loss on your holdings if you had to sell below where you bought it from. It is insane how invasive it has become. But this isn't the only tax problem that we're dealing with in Bitcoin and crypto. I mean, you mentioned on, I've been following you on X and you've been on the Hill advocating for a de minimis tax exemption which could solve some of these problems too and also give people a bit of breathing room when it comes to using this as a day to day money.

[A]

Yeah, no, absolutely. We, we all know crypto is the future of commerce. Whether it's using Bitcoin or a stablecoin, you need to be able to transact with crypto without having to have record keeping requirements. If I've got to have a notepad or an app tracking every time I buy a cup of coffee with crypto and what I bought it for in the gains that pushes away use. I mean it's just, it's backwards, it doesn't make sense. And that's what we're living in right now. I've got a client and we recorded a video. We had to literally fill up a banker's box, the big cardboard box of transaction data, and ship it to the IRS because the file was too large to e file it. Too many transactions. Now, what did this all add to? Tens of thousands of dollars? Right. But the amount of transactions, because every penny has to be reported to the irs. Every penny transaction has to be reported with gain or loss calculated. It's absurd. It's keeping people from using it. And for a lot of our clients, it's even pushing them overseas. If you have to determine where you're setting up your crypto company, you can have U.S. obligations where every penny's gotta be reported or other countries where there's a much more logical tax system. And so, yes, we need changes, especially for things like de minimis. The recordkeeping on that alone, it's not even so much about paying taxes on those amounts, but just having to account for every single dollar that you spend. It's just outrageous.

[B]

It really is. It really is. What in your mind would be a reasonable de minimis tax exemption price level?

[A]

No. There's been some draft legislation in D.C. senator Lummis has drafted legislation. I believe it's got a. I think it's a $5,000 aggregate. And, you know, somewhere around there I think is reasonable. What we're looking for is an amount where, when we're transacting with crypto, that we don't have to do all that record keeping. If there's large amounts being spent, I think we all understand, right? But when we're just trying to make everyday purchases or we're paying gas fees, paying fees on our transactions, it's this outrageous result where if you're paying a fee now there's a tax on that and you've got to report that in itself. We just need simplification overall. So I think it's a lot less about the aggregate amount than that. We need just a way to have a simplified way to report these small transactions.

[C]

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[B]

I mean, I was supposed to record with you in person last week, but schedules got misaligned and weren't able to sit down in person. What's it been like interacting with politicians on the Hill? Are they receptive to this? Is it a lot of handholding and Bitcoin 101 and explaining how these things work? Or are more and more representatives and senators beginning to understand what's lying before them?

[A]

Yeah, there has been incredible progress very quickly. And my day to day job is working with clients, tax reporting, handling audits, criminal investigations, seeing what really is involved with tax reporting for crypto in the United States. But over the last couple of years, we've brought these stories to D.C. having conversations with policymakers about how crypto is actually used, the potential for a chiropractor in Florida, for a Uber driver in North Carolina to generate life changing wealth, but at the same time having these incredibly difficult tax situations, which are just crazy. And over the last couple of years, what I've seen in D.C. is a shift from what is crypto? To how can we legislate effectively to make sure crypto stays in the US which is incredibly refreshing. The last decade we've had administrations trying to kill crypto. We've advised clients countless times on leaving the country with their crypto businesses or even individually expatriating because of the climate that we're in. We now have people, we have senators, congressmen, who want to have legislation that benefits crypto. Keeps it in the United States. One of the most positive parts of the conversation has been the focus on taxes, especially crypto taxes. It's not the sexiest topic, right? No one loves to talk about tax, right? Except I do. I love tax. But overall, people, you know, generally you start, you're, you're at a party and you start to talk about tax, you're not gonna be the life of the story. But at the same time, taxes impact all of us, right? Every single crypto investor, every person watching this video in the US has to report crypto on their taxes. And many of them have stories of the difficulty of, of IRS notices of just trying to report, not knowing how to report. And there's now been more attention and focus on the tax issues. Specifically, it sounds like after clarity and market structure, that the attention is going to shift to crypto taxes, that the administration recognizes that crypto taxes are a problem, we need to fix it. I talk often about the comparison of crypto to opportunity zones. Opportunity zones are this tax break that Congress passed several years ago. And since then there have been pages and pages, thousands of pages of, of guidance of cases about opportunity zones. Yet 20,000 people, by some estimates last year took advantage of it. Very small group crypto. On the other hand, we have millions of people participating in crypto, something like 10 documents from the IRS on clarity. The government, the policymakers people and treasury that I've spoken to understand this problem. They want to find solutions. And that's a big shift from the conversations that I had even a year or two years ago. So what I'm, I'm seeing is that there is focus on these actual issues and hopefully after we get done with clarity that we start to actually see more emphasis on legislation to address these problems.

[C]

Yes.

[B]

And so I mean we talked about de minimis and obviously the low hanging fruit tax changes that could be made to make it easier for bitcoiners just to go about their day without having to worry about the IRS coming down to them. When it comes to the 1099 DA and this HDAF form that they're sending out during audits. What changes would you like to see there, if any?

[A]

But we need people at the IRS that are informed about crypto and want to put in place policy that brings people into compliance, generates revenue for the government, while at the same time doesn't create fear in the everyday crypto investor of what happens if they come forward, what happens in an audit? How do I make sure an audit is done fairly and gets to adjust result, not data that can be weaponized now or in the future towards other goals. So forms like this form should not be part of an audit, criminal investigation or more severe situations. I think that potentially, but for an everyday crypto investor, everyday audit, having forms like this also even just the tools the IRS is using in audits, we need to come from a place of understanding crypto and wanting to bring in compliance and get to the right result rather than just viewing every crypto investor as a criminal. So I think having people in place at the IRS policy that starts putting clarity on some of these issues so that the auditors have less discretion. But also getting rid of forms like this, it's just unnecessary.

[B]

Yeah, I think one of the main reasons why it made a big splash, obviously people were thinking about all the exchanges that they may have used in the past that may not exist anymore and think, oh that's, that's going to be a massive headache. But the other, another big one is the privacy intrusion, particularly for individuals holding Bitcoin and other crypto assets in self custody, using hardware wallets like Ledger Trezor, using something like Metamask. And I think the strongest reaction I saw when you posted the forum was wow, they're really trying to tag and bag where Bitcoin is sitting. And I think that is an important conversation that needs to be had is what right do individuals have to privacy over their financial assets, especially in a world with these transparent ledgers that exist now with Bitcoin.

[A]

Yeah, no, absolutely. I think even personally one of the most surprising things about this form was that it wasn't just centralized exchanges. They want to know about wallets, they want to know about defi, even just self custody wallets potentially that there aren't any transactions on and we have a right to privacy. And then the government has been recognizing more and more so the need for privacy with cryptocurrency. And when it's just sharing information like this, it creates a lot of risks and problems for the industry overall.

[B]

What's like the worst case you've seen somebody who thought they were doing everything by the book, got caught up in an audit and still got caught in a little compliance trap.

[A]

Oh gosh. Well, we've got a client that did his best to report advanced trader trading thousands of times per year. But that's not necessarily anything unusual. He did his best report, used professional crypto tax software to report under audit. The IRS took all his transactions through it in the software that they use. And they, they have, let's just say it's over $75 million is what they think his gains are now the actual number likely in the order of millions, but not 75 million. And now we've got an uphill battle of trying to argue to the IRS why their calculations are, are incorrect. But what we've seen in many audits, and this is just an example of it, is that they're using outdated software. They don't understand distinctions like wrapping like entries into liquidity pools, even simple things. Stablecoins that stablecoins are actually tied to a dollar. And I don't need to prove that I paid a dollar for it. They're actually a dollar pretty close to it. Not worth the fight. But over 99 cents. IRS wants to say it's 99 cents, go for it. You want to say it's a $1 fine, but they're saying it's zero is your cost basis. But overall we've got several audits where they think the gains are just drastically higher than what they actually are. And we now have to argue and show why that that's incorrect. This is taken going to appeals, sometimes even tax court. One story that less in terms of dollar but I think Perhaps more shocking, the client didn't report his stablecoin sales. He had, I think it was about $200,000 of stablecoins that he sold, didn't report it on his taxes. The IRS audited him, issued a notice and said, well, if you didn't report any cost basis, you didn't report on your taxes and it's zero cost basis. As a result, he's got a $70,000 tax bill. We had to take that to Tax Court to argue to the IRS that stablecoins actually were $pecked that it's not a 100% gain. So to me that was an example of something that was just absolutely absurd. You shouldn't have to hire an attorney, go to tax court, argue that it's dollar for dollar. The IRS should just know those types of things.

[C]

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[B]

do these audits typically take up?

[A]

Months to years. Lovely.

[B]

Lovely. It's, you know, Andrew, I'm not going to lie. Somebody who's been observing the rampant fraud that is, that is happening with our, with our tax dollars. It's a bit frustrating to see that the IRS is this ardent about targeting people in bitcoin and crypto or just targeting anybody in general for audits when the federal government is taking those tax dollars and just frivolously putting it into programs that are being pillaged by overt fraudsters. And yes, they're starting to catch them, but it seems to me at least that they've been able to get away with overt pillaging of public systems, public benefit systems, for quite some time now.

[A]

Right. You know, I hear every day from crypto investors who want to pay their fair share, the industry, despite what some policymakers view it, we want to pay our taxes, we want to pay the fair share. We just want to know what the rules are. And we need a path where we're not afraid of audits, we're not afraid if we do our best that they're going to penalize us or drag us through an audit for four years. But unfortunately there just has not been a good path towards that. There hasn't been a way for people to come forward, know what they owe, pay that tax. And that's something that we desperately need. Whether you're in favor of this administration or not. What we do know is that tax revenue is, is vital. And the crypto industry, eventually we're going to all want to cash out and buy our islands and Lambos when bitcoin hits a million dollars, right. I don't know about you, but that's, that's my price, right? When it's a million dollars and I think it's time for the island. But that's what we're all waiting for. But we need to have a system where we can come forward, pay our taxes. And it's just unfortunately not been the way it hasn't.

[B]

And you've been advocating for a voluntary disclosure program.

[C]

What would that look like?

[A]

Yeah, that's correct. And to me this is a no brainer. So win, win. I got a call yesterday from someone, hasn't filed their taxes since 2017 because he made a lot in crypto in 2017 as a bull market. 2018, crashed, made a lot. And he's afraid that if he comes forward, files his taxes, reports his crypto, he's going to be audited or even criminally investigated. Now he doesn't have any or very little, he's lost much of it. But he's afraid that if he comes forward, he's going to have an investigation, have an audit. And he's afraid of that. And that's been his situation for years. As a result, he can't buy a house because he hasn't filed his taxes. All of these results, all these repercussions, there needs to be a way where crypto investors can come to the irs, file their old years of taxes, report their crypto as best as they can. Right? There are crypto exchanges that you can no longer access your data, but the best that you can, and then pay the tax, maybe even a small penalty, a reduced penalty, and move on and have some sort of assurance from the IRS that you're not going to be criminally investigated in the future. This, a program like this makes sense. It would drive billions of dollars to the federal government. It would allow people to finally pay their taxes, not be in fair have cost basis that's reported. And what we're at right now is this inflection point where the IRS is going to start receiving all this 1099 DA information. And what are they going to do with that? They can either do nothing or they can do audits or investigations. Every investor that is receiving a 1099 DA that hasn't reported crypto in the past is now going to be sitting with a decision. Do I go back and try to report in the past? Do I ignore those earlier years? Do I say zero cost basis? It's a big mess. Maybe you're sitting here and you don't even know what I'm saying. You just know it's a mess. A program like a voluntary disclosure program would be a way for these people to come forward. There's been precedent for this in the past. About 20 years ago, the IRS realized that people were putting money offshore into bank accounts, Swiss bank accounts, not realizing that they had to report that on your U.S. taxes. In fact, in the U.S. you've got to report your Swiss bank accounts. You got to pay tax on the interest. People just didn't know that. The rules weren't very clear. It wasn't a lot of education, the guidance wasn't great. The IRS created a program called the Offshore Voluntary disclosure program where people could come forward, in fact with full amnesty. Pay your tax, no penalties, no investigations. Pay your tax. There's been precedent over the years in other areas other than crypto for these types of programs. And what we're seeking is the same thing for crypto. There are, there are countless people who want program like this. We just need a path forward for this to happen.

[B]

In your experience putting, putting the IRS agent hat on, what do they perceive as like the lowest hanging fruit out there to trigger an audit of an individual? Is it not filing your taxes for a number of years and filing it one year and out of the blue you're reporting all these crypto holdings. Is it simply you make a lot of money, they're trying to target people over a certain wealth bracket. What's the go to trigger here?

[A]

The unfortunate news to begin with, and I'm not just trying to scare people out there, but what we've seen over the last few years is that the IRS sees the crypto industry as low hanging fruit. Even been testimony about this crypto industry largely has not paid their taxes. Especially with bitcoin hitting over $100,000. There's no question to a lot of people in government or the irs, there are people that have a lot of money that have not paid their taxes. So overall, the unfortunate news is the crypto industry has been a big target of enforcement. When I started my practice over 10 years ago, crypto was starting to be part of it in 2014. But it wasn't, wasn't all what we did. We helped people with other types of audits. In fact, in the beginning there's mostly other types of audits. Now our practice is almost exclusively crypto audits because there's just so much demand, there's so many crypto audits happening. What we see as some of the common factors in these audits is often no crypto reporting at all, despite clear indications that there's crypto using US Crypto exchanges, some of them even reporting over the years to the irs. Another being that they just reported the US centralized exchanges. But the IRS has, through John Doe summonses, through agreements with places like Binance, have gotten data that suggests that there's other exchanges or other, other things out there to report. What the IRS is very bad at knowing is how much, what are the dollar amounts. Because crypto, it's people that are trading. You could have $10,000 of crypto that looks like a million dollars of transactions if you're trading all day long. And that's why sometimes they target people who don't have substantial amounts of gains but just have a lot of activity because it looks like there's just a lot going on. Audits often begin because the IRS has some information that's inconsistent with what's on your tax return. And the IRS is getting more and more and more information that they could then use and cross reference against your taxes.

[B]

It makes sense. Are traders bottom of the low hanging

[A]

fruit for the irs? Typically? I guess so, yes.

[B]

Yeah, it's fascinating stuff. What advice do you have? We're approaching April 15th year. We've got, what do we got? 7, 22 days until tax season. Anybody who's listening to this saying, oh crap, I, I've not been checking the boxes on the list that Andrew is laying out here. What, what is your advice to them?

[A]

Well, let's start with the current year, 2025, taxes due April 15th. If you used a US exchange in 2025, they should have issued you a 1099 DA form. There's a couple exchanges that are late to say the least on issuing those forms, but you should have received one. If you haven't, the obligation is on you to go find it, download it online, make sure that you use it to file your taxes. That form is getting reported to the irs. It needs to be consistent with what's on your taxes. Don't ignore that form, even if you didn't again get it in the mail. But you know, you just use the US Exchange, go try to download it, work with a professional, or use a crypto tax software to input the cost basis into all the missing spots on that 1099 DA form. This process is going to take time. It's not easy. One of the, the biggest suggestions that I have to people out there is file an extension for your taxes. Taxes are due April 15th but you can extend that to October 15th, six months by filing an extension. It's automatically granted. It will give you the time to get all your records together. Make sure that the 1099 is properly reported on your taxes. This is not an extension to pay. Your tax payment is still due April 15th. So if you think you're going to owe something, you should make a payment and then file your extension. But overall, one of the best things you can do right now, especially if you have earlier years that you didn't report on your taxes, is file that extension. Then work with a professional to get the earlier years caught up the current year, get it all calculated, file one time correctly. We've worked with countless people over the years that have used do it yourself software, tried their best to fill in gaps and then get audited. The amount that you will spend having to deal with that is exponentially more than just hiring a professional, trying to do it right the first time. And if you didn't report those earlier years, it makes sense to talk to someone to see which year should you report. There are statutes on some of these years. I'm not in favor of paying the IRS the maximum possible right. No one wants to pay the most. Right. But we need to pay the proper amount and make sure that we're doing things to not be targeted or audited by the IRS and assessing how many years to go back, how far can they actually audit you? These are all important decisions to have. But overall, you can't ignore crypto taxes. You can't just say, hey, it happened last year. I'm going to start reporting going forward the right way. You can still be audited for several years backwards.

[B]

Awesome. And then in terms of aiding your efforts on Capitol Hill and the advocacy for sensible tax policy, what. What should anybody is listening do in terms of helping. Helping get more sensible legislation across the line?

[A]

Yeah. What has been surprising and very positive to me is the policymakers want to hear stories. They want to understand how we're being impacted by crypto, by tax policy, by these audits. Reach out to me, share your story, Let me know how crypto taxes have impacted you. We also want to make sure that as policy is written in D.C. that it's not just the big players, especially with clarity. There are only so many voices on policy in D.C. on the Hill.

[B]

Right.

[A]

You hear kind of the same stories happening, the same policy points being advocated for as things shift to crypto taxes, which impacts all of us. What we are fighting to make sure happens is that all of our voices are heard the everyday investors, the small businesses, not the big crypto Wall street companies. I won't mention them, but if you look at clarity, it's overwhelmed by certain voices. But crypto is not that necessarily. It's all of us. It's all of us trying to build, invest, create things. So follow Follow us online, Join our events and share your stories. It's one of the easiest things you can do is reach out to me and share your story.

[B]

Well, Andrew, thank you for taking time during Sax tax season to to share your story. Maybe Sax season two. I mean you're in Chicago area, very good Jazz in the city in blues. So thank you for taking time to share your story. This is very helpful and I'm sure it's going to stress a lot of listeners out, but it's better to understand this stuff than not to.

[A]

Absolutely. Well, thank you for having me and bringing attention to this important topic, but one that I get it. Not everyone wants to pay attention to.

[B]

Yeah, well, hopefully we can do this again as things progress and we get more information and hopefully better laws around Bitcoin tax policy.

[A]

Absolutely.

[B]

All right.

[C]

Peace of Love Freaks thank you for

[B]

listening to this episode of tftc. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there. Also, wherever you're listening, whether that's YouTube, Apple, Spotify, make sure you like and subscribe to the show. And if you can, leave a rating on the podcasting platforms, that goes a long way.

[C]

Last but not least, if you want

[B]

to get these episodes a day early and ad free, make sure you download the Fountain podcasting app and go to Fountain FM to find that $5 a month get you every episode a day early. Ad free helps. The show gives you incredible value, so please consider subscribing via Fountain as well. Thank you for your time and until next time.