When to Consult Legal Counsel for Crypto Tax and Compliance
9 July 2025

Crypto Tax Compliance Checker

Assess Your Crypto Tax Compliance Needs

Answer a few questions to determine if you should consult a crypto tax lawyer. Based on IRS guidelines, 1.2 million U.S. taxpayers received letters about unreported crypto activity in 2025. Don't wait for an audit—act now.

1. Have you received any IRS or state tax agency letters about crypto?

2. Have you traded crypto across multiple countries or used decentralized exchanges?

3. Have you run a crypto business (mining, NFT sales, etc.)?

4. Are you being investigated for fraud, money laundering, or unregistered securities?

5. Have you failed to report crypto gains for multiple years?

6. Are you unsure how to report staking, airdrops, or hard forks?

7. Are you considering a crypto estate plan?

Results

Answer the questions above to see your compliance status.

Most people think crypto taxes are just about tracking buys and sells. But if you’ve traded, mined, staked, or even received crypto as a gift, you’re already in a legal gray zone - and the IRS isn’t waiting for you to figure it out. In 2025, over 1.2 million U.S. taxpayers received IRS letters about unreported crypto activity. If you’re one of them, or even just worried you might be, waiting until you get audited is like ignoring a warning light until your engine seizes. Crypto tax and compliance isn’t a DIY job anymore. Here’s exactly when you need a lawyer - not just an accountant.

You’re being contacted by the IRS or a state tax agency

If you get a letter from the IRS about crypto, don’t reply yourself. Don’t call them. Don’t panic and file amended returns without legal advice. Those letters aren’t requests - they’re the first step in an audit. The IRS uses data from exchanges like Coinbase, Kraken, and Binance to flag transactions. If you sold Bitcoin in 2022 and didn’t report the gain, they already know. A tax preparer can help you file the right forms, but only a lawyer can protect you from penalties or criminal exposure. Once the IRS opens an audit, your options shrink. A lawyer can negotiate a voluntary disclosure before the audit starts, often reducing penalties by 80% or more. After it starts? You’re in defense mode.

You’ve traded crypto across multiple countries or used decentralized exchanges

If you’ve swapped ETH for SOL on Uniswap, sent BTC to a friend in Germany, or earned yield on a DeFi protocol based in Singapore, you’re dealing with cross-border tax rules. The U.S. taxes worldwide income - even if the transaction never touched a U.S. bank. But other countries have their own rules. Canada treats crypto as a commodity. The UK has separate rules for staking rewards. Australia considers crypto as property. If you’re not sure where you owe taxes, or if you’ve moved crypto between jurisdictions without reporting, you’re risking double taxation or penalties from multiple agencies. A crypto tax lawyer understands how U.S. law interacts with foreign reporting requirements like FBAR and FATCA. They can help you structure disclosures to avoid triggering investigations abroad.

You ran a crypto business - even if it was small

Selling NFTs on OpenSea? Running a crypto faucet? Mining with a few GPUs? If you made more than $400 in crypto income in a year, you’re self-employed. That means you owe self-employment tax on top of capital gains. But here’s the catch: the IRS doesn’t care if you thought it was a hobby. If you’re selling goods or services for crypto, you’re a business. And if you didn’t keep records, you’re vulnerable. A lawyer can help you prove your business was legitimate, set up proper bookkeeping systems, and avoid reclassification as a “tax evader.” They’ve seen clients get hit with back taxes, penalties, and even criminal charges for “structuring” transactions to avoid reporting - even when they didn’t intend to hide anything.

You’re being investigated for fraud, money laundering, or unregistered securities

If you launched an ICO, sold tokens to friends, or promoted a crypto project as an investment, you might have accidentally violated securities law. The SEC doesn’t care if you called your token a “utility token.” If buyers expected profits from your efforts, it’s a security - and you need to register it or qualify for an exemption. The SEC has brought over 100 enforcement actions against crypto projects since 2020. The DOJ has prosecuted people for laundering crypto through mixers. If you’re being contacted by federal agents, don’t talk. Don’t delete anything. Call a lawyer immediately. Even if you think you did nothing wrong, federal investigations don’t care about intent. They care about evidence. A lawyer can help you respond without incriminating yourself.

A lawyer in document armor protects a child from a federal agent, surrounded by global crypto tokens and maps in a child-friendly style.

You’ve failed to report crypto gains for multiple years

The IRS has a six-year window to audit returns if they suspect underreporting by 25% or more. If you sold crypto in 2020, 2021, and 2022 and didn’t report gains, you’re looking at three years of back taxes, interest, and penalties - potentially over $10,000 in fines alone. The IRS’s Streamlined Filing Compliance Procedures only work if you’re not under audit. A lawyer can help you file amended returns under the IRS’s Voluntary Disclosure Program. This program reduces penalties dramatically - sometimes to just 5% of the highest year’s unpaid tax. But you have to act before the IRS finds you. Waiting until you’re audited? That’s when penalties jump to 75% for fraud.

You’re unsure how to report staking, airdrops, or hard forks

Staking rewards? Airdrops? Hard forks? The IRS says these are taxable as ordinary income at the time you receive them - not when you sell. But most tax software doesn’t handle this well. If you got 100 DOT from staking in January and sold them in June, you owe income tax on the value when you got them, and capital gains on the difference. If you received 500 UNI in an airdrop and didn’t report it, you’re underreporting income. A CPA can calculate this - but only a lawyer can help you defend it if the IRS challenges your valuation. The IRS has gone after people for using inflated prices from obscure exchanges. A good crypto tax lawyer knows which data sources the IRS accepts and how to document them properly.

You’re considering a crypto estate plan

Crypto isn’t just money - it’s digital property. If you die without a plan, your heirs might lose access to your wallets. Worse, they might inherit a tax liability they didn’t know about. The IRS treats inherited crypto like any other asset - step-up in basis applies, but only if the estate is properly documented. If your wallet keys aren’t passed on legally, your heirs could face penalties for unreported gains. A lawyer can help you create a crypto estate plan that includes digital wills, trust structures, and secure key management. They can also help you avoid probate delays that could lock your assets forever.

A family studies a glowing crypto ledger at home, with a wise owl guiding them to create a treasure map for digital inheritance.

How to pick the right crypto tax lawyer

Not every tax lawyer knows crypto. Don’t hire someone who says, “I’ve handled a few crypto cases.” Look for these traits:

  • They’re licensed attorneys with CPA credentials - dual qualification is rare but critical.
  • They’ve been practicing tax law for at least 15 years - crypto changes fast, but tax law doesn’t.
  • They use professional crypto tax software like Koinly, CoinTracker, or TokenTax - and can explain how it works.
  • They’ve represented clients in IRS audits or DOJ investigations - ask for anonymized case examples.
  • They don’t promise “no taxes owed.” They explain risk, options, and consequences.

Avoid anyone who says, “I can make your crypto tax disappear.” That’s fraud. The best lawyers don’t hide your activity - they make it compliant.

What happens if you do nothing

The IRS has increased its crypto enforcement budget by 300% since 2020. In 2024, they collected over $2.1 billion in crypto-related penalties and back taxes. Criminal charges for crypto tax evasion are rising - 17 federal prosecutions in 2023 alone. One man in Florida got 3 years in prison for hiding $1.2 million in crypto gains. Another in Texas lost his home to a lien after failing to report $450,000 in mining income. The penalties aren’t theoretical. They’re real. And they’re getting worse.

If you’re reading this because you’re worried, you’re not alone. But the clock is ticking. The sooner you act, the more options you have. Waiting doesn’t make the problem go away - it just makes it more expensive.

Do I need a lawyer if I only bought and held Bitcoin?

No, not yet. Buying and holding Bitcoin without selling, trading, or spending it doesn’t trigger a taxable event. You only need legal help if you’ve disposed of crypto - meaning you sold it, traded it for another coin, used it to buy goods, or gave it away. If you’ve only bought and held, you’re fine - but keep records of your purchase price and date in case you sell later.

Can my accountant handle crypto tax issues?

Maybe - but only if they’re also a licensed attorney. Most CPAs understand the basics of crypto taxation, but they can’t represent you in an IRS audit or negotiate with the DOJ. If you’re under investigation, your CPA can help prepare documents, but they can’t give legal advice or protect you from criminal charges. A lawyer can. For anything beyond filing, you need someone who can stand in court.

What if I didn’t know crypto was taxable?

Ignorance doesn’t protect you from penalties, but it can reduce them. The IRS looks at intent. If you never reported crypto because you genuinely didn’t know, you may qualify for “reasonable cause” relief. But you still have to file amended returns and pay what you owe. A lawyer can help you prove your lack of intent and avoid fraud penalties. Don’t wait for the IRS to assume you lied - act before they do.

How much does a crypto tax lawyer cost?

Fees vary. Most charge $300-$600 per hour. A simple amended return might cost $2,000-$5,000. A full voluntary disclosure with IRS negotiation can run $10,000-$25,000. If you’re facing a criminal investigation, costs can exceed $50,000. But compare that to a $100,000 penalty or jail time. The right lawyer saves you more than they cost.

Can I just use crypto tax software instead?

Software like Koinly or CoinTracker is great for tracking transactions and generating reports. But it doesn’t interpret tax law, respond to IRS notices, or defend you in court. If you’re just filing, use software. If you’re being audited, investigated, or unsure about your past activity, software won’t protect you. A lawyer does.

What to do next

If you’ve traded, earned, or spent crypto since 2014, take these steps now:

  1. Gather all wallet addresses, exchange accounts, and transaction histories.
  2. Use a crypto tax tool to calculate your gains and losses.
  3. If you find unreported income or large gains, don’t file amended returns alone.
  4. Book a consultation with a crypto tax lawyer - even if you’re just curious.
  5. Start keeping records: date, amount, value in USD, purpose of transaction.

You don’t need to be perfect. You just need to be compliant. And the sooner you act, the more control you have over your future.

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