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Complex Tax Issues

Cryptocurrency Tax Issues
Digital Assets. Real Taxes.

The IRS treats cryptocurrency as property, and every transaction — trade, swap, sale, or spend — is a taxable event. We help crypto holders comply, plan, and defend against IRS enforcement.
Sam BrotmanSam Brotman, J.D., LL.M.
Last updated July 2026

Key Takeaway

The IRS has made cryptocurrency enforcement a top priority. If you’ve traded crypto, participated in DeFi, or earned income in digital assets, your reporting obligations are broader than you think — and the penalties for noncompliance are severe.

The IRS Is Watching Crypto. Are Your Records Ready?

If you’ve traded cryptocurrency, earned staking rewards, participated in DeFi protocols, minted NFTs, or received airdrops, you have tax obligations. Every disposal of cryptocurrency is a taxable event that requires tracking cost basis, holding period, and gain or loss.
The IRS has made cryptocurrency enforcement a priority. They’ve sent ‘educational letters’ to thousands of taxpayers, added a digital asset question to Form 1040, and obtained court orders compelling exchanges to turn over user data. Non-compliance is no longer anonymous.
Crypto taxation is uniquely complex: thousands of transactions across dozens of wallets and exchanges, DeFi interactions with no clear guidance, and evolving regulatory requirements. We help clients untangle the complexity and establish compliant positions.

From Our Practice

We’ve represented crypto traders, DeFi participants, and NFT creators facing IRS scrutiny over unreported digital asset transactions. The IRS has made cryptocurrency enforcement a top priority, and the reporting rules are evolving faster than most taxpayers can keep up with.

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Free 15-minute call. No obligation. We'll tell you exactly where you stand.

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What We Handle

Cryptocurrency Tax Services

Crypto Tax Compliance

We prepare and review cryptocurrency tax reporting — Form 8949, Schedule D, and all required disclosures — ensuring accurate reporting of gains, losses, and income.

IRS Audit Defense

If the IRS is examining your crypto transactions, we represent you through the entire audit process — from information requests through appeals if necessary.

Unreported Crypto Income

Haven't reported past crypto gains? We help you come into compliance with minimized penalties through amended returns and voluntary disclosure.

DeFi & Staking Taxation

Yield farming, liquidity pools, staking rewards, and lending protocols create complex tax events. We analyze each interaction and determine the correct tax treatment.

NFT Tax Issues

Creating, buying, and selling NFTs has specific tax implications depending on whether the NFT is a collectible, a capital asset, or business income.

Cost Basis Reconstruction

Lost records? Multiple exchanges? We reconstruct cost basis using blockchain data, exchange records, and forensic analysis to establish defensible positions.

Understanding the Process

Crypto Taxes: Explained

How is cryptocurrency taxed?
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.

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Not Sure Where You Stand?

Schedule a free 15-minute call. We’ll assess your situation, outline your options, and tell you exactly what to expect — no obligation.
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Why Brotman Law

Crypto Tax Expertise From Tax Attorneys

Crypto-Native Understanding

We understand blockchain technology, DeFi protocols, and the crypto ecosystem — not just the tax rules.

IRS Defense Experience

We've defended clients in IRS audits of cryptocurrency transactions and know what the IRS targets.

Cost Basis Specialists

We reconstruct transaction histories and cost basis across dozens of exchanges and wallets for defensible reporting.

Evolving Guidance

Crypto tax law is changing rapidly. We stay current with IRS guidance, regulations, and case law as it develops.

Attorney-Client Privilege

Disclosing unreported crypto to your tax attorney is protected by privilege. Disclosing to your CPA is not.

Comprehensive Tax Practice

Crypto is part of your overall tax picture. We optimize your crypto tax strategy within your broader financial situation.

Learn More

Crypto Tax Guides & Resources

Free Guide

Free Tax Resources

Guides to cryptocurrency tax reporting and IRS compliance.

  • Read the Guide

Free Guide

Individual Tax Strategy

Optimize your crypto taxes within your broader personal tax plan.

  • Read the Guide

Free Guide

International Tax

Crypto on foreign exchanges may trigger FBAR and FATCA reporting.

  • Read the Guide

Free Guide

Read our Crypto Tax Guide

A comprehensive, attorney-written resource covering everything you need to know about this topic.
Related services: Individual Tax Optimization • Residency & Multi-State Tax • Exit Planning

Also consider: IRS Audits • Criminal Tax Defense

Frequently Asked Questions

Cryptocurrency Tax FAQs

Is every crypto trade a taxable event?
Yes. Selling crypto for cash, trading one cryptocurrency for another, spending crypto on goods or services, and receiving crypto as payment are all taxable events. Simply holding (HODLing) or transferring between your own wallets is not taxable.
Crypto-to-crypto trades are taxable events. When you swap Bitcoin for Ethereum, you recognize a gain or loss on the Bitcoin based on its fair market value at the time of the trade minus your cost basis.
Yes. The IRS has indicated that staking rewards are ordinary income when received, valued at the fair market value at the time of receipt. This creates both income tax and a new cost basis for the received tokens.
Capital losses on cryptocurrency can offset capital gains and up to $3,000 of ordinary income per year. Excess losses carry forward to future years. However, the wash sale rule may apply to crypto losses starting in 2026 under proposed legislation.
Increasingly, yes. Major exchanges are required to issue 1099 forms, and the IRS has obtained court orders for customer data from Coinbase, Kraken, and others. New broker reporting rules under the Infrastructure Investment and Jobs Act are expanding reporting requirements.
No. Mined cryptocurrency is taxable as ordinary income at its fair market value when received. If you mine as a business, the income is also subject to self-employment tax. You may deduct mining expenses against the income.

As Featured In & Recognized By

Forbes Business Council

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