IRS Audit Defense

 An IRS audit is a thorough review of your tax return to verify its accuracy and compliance with tax laws. During the review, an auditor compares the amounts you reported with the records used to prepare your return. The auditor also checks information submitted by third parties, such as employers and financial institutions, to the IRS and Social Security Administration.

The audit helps the IRS determine whether you reported the correct amount of tax and whether any additional tax is due. Receiving an audit notice can feel overwhelming, but you don’t have to face the process alone. Blockchain Tax Consulting provides knowledgeable representation and clear guidance to help you navigate your audit with confidence.

 IRS audits generally fall into three categories, each differing in location, scope, and complexity:

• Correspondence Audits: Conducted by mail, these audits typically focus on specific items on your tax return. The IRS may request documents to verify reported income, deductions, or credits.
• Office Audits: Held at an IRS office, these audits involve an interview and a review of requested supporting records. The auditor asks questions to clarify information on your return and determine whether adjustments are needed.
• Field Audits: These more extensive reviews may take place at your home, business, or tax professional’s office. They can involve a detailed examination of financial records and business activities.

Every audit presents its own challenges. Blockchain Tax Consulting provides experienced guidance and representation to help you understand your rights, respond to IRS requests, and navigate the process with confidence.

 Five practical steps can help you prepare for an IRS audit:

• Organize Your Records: Keep receipts, financial statements, and other supporting documents clearly labeled and easy to follow. Well-organized records help explain your return and support the deductions and credits you claimed.
• Seek Professional Representation: Blockchain Tax Consulting can help you understand the audit process, prepare your responses, and advocate for your interests.
• Stay Calm and Cooperative: Communicate respectfully and professionally with the auditor. A courteous approach can help keep discussions productive and make it easier to resolve questions.
• Understand Your Rights: Review the IRS Taxpayer Bill of Rights to learn about the protections available to you during an audit.
• Respond Promptly and Carefully: Track deadlines, review requests with your representative, and provide relevant documentation. Keep copies of everything you submit and ask for clarification when a request is unclear.

 An IRS audit generally involves the following steps:

• Notification: You receive a letter from the IRS identifying the items under review and explaining what information or documents you need to provide.
• Professional Guidance: Consult a credentialed tax professional to understand the request, assess potential issues, and plan your response. Blockchain Tax Consulting can help guide you through the process.
• Preparation: Gather and organize the relevant records. Clearly labeled documents and a table of contents can make your submission easier to review.
• Review: The auditor examines your supporting documents and considers information gathered through interviews or follow-up requests.
• Outcome: The IRS provides its findings, which may result in no changes, a refund, or additional tax owed.
• Appeal: If you disagree with the findings, you may challenge them through the applicable IRS appeals process or seek review in the United States Tax Court, subject to eligibility requirements and deadlines.

Our firm offers comprehensive audit support services designed to help clients navigate IRS and state examinations with confidence. We assist in organizing and reviewing financial records, responding to tax authority inquiries, and preparing clear documentation to substantiate reported transactions — including complex cryptocurrency activity. Our experienced professionals communicate directly with auditors on your behalf, ensuring that your rights are protected, your position is accurately represented, and the audit process is handled efficiently from start to finish.

If you have unreported cryptocurrency income, or filed returns that don't fully reflect your trading, staking, or DeFi activity, we can help you get back into compliance before the IRS contacts you. We review your transaction history, calculate correct gains and income, and prepare amended returns or pursue voluntary disclosure where appropriate — working to minimize penalties and exposure while resolving past filing gaps.

Foreign accounts, exchanges, and crypto holdings can trigger FBAR and FATCA reporting obligations that are easy to miss. If you're facing a proposed FBAR penalty or need to catch up on offshore reporting, we bring direct IRS experience in international and digital-asset compliance to build your defense, evaluate voluntary disclosure options, and work to reduce or eliminate penalty exposure.

An examination does not usually begin with an auditor at your door. It begins with a letter, and which letter it is tells you how far along the process already is.

CP2501, initial contact regarding an income discrepancy. The IRS has matched third-party reporting against your return and found a gap. Responding well here can end the matter.

CP2000, proposed changes to your tax return. A specific proposed adjustment with tax, penalties and interest attached. It is a proposal, not a bill, and it can be disputed.

Letter 2205, audit appointment notice. Your return has been selected for examination and an appointment is being scheduled.

CP75, examination in progress with your refund on hold. The IRS is examining a credit or item on your return and is holding the refund while it does.

Letter 525, Letter 915 and Letter 950, the 30-day letters. The examination has produced proposed changes, and you have a limited window to respond or to request a conference with the IRS Independent Office of Appeals. Which of the three you receive depends on the examination function handling your case; the right it carries is the same.

One thing worth knowing: the CP2501 is supposed to precede the CP2000, but in practice the IRS frequently skips it and goes straight to the CP2000. If a proposed adjustment appears to have arrived without warning, that is usually why, and it does not mean you missed a letter.

Digital asset holders are seeing more of these than they used to. Exchange reporting has improved considerably, which means the third-party matching that drives the CP2501 and CP2000 now sees activity it did not see a few years ago. The 30-day letters are where an examination is most often won or narrowed. Once that window closes, the options are fewer and the cost is higher.