IRS claims I owe $13k from crypto trading that actually lost me money in 2021 - help!

This is actually a common misunderstanding with crypto trading and tax reporting. The "total proceeds" on a 1099 from brokers like Robinhood represents the total value of all your sales transactions, not your profit. It's basically adding up the gross amount of every single sale you made, regardless of what you paid for those assets. If you bought $100 of Bitcoin, then sold it for $90, then used that $90 to buy Ethereum, then sold the Ethereum for $85, Robinhood would report "proceeds" of $90 + $85 = $175, even though you actually lost $15 overall. If you made dozens or hundreds of trades, those "proceeds" can add up to a large number even if you were losing money. What you need to do is file Form 8949 and Schedule D with your tax return (or an amended return if you already filed for 2021). On Form 8949, you'll list each transaction with both the proceeds (sale price) AND your cost basis (what you paid). This will show your actual capital gains or losses. Your net loss of $800 should be reflected there, and that's what actually determines your tax liability - not the gross proceeds.

I went through almost exactly the same nightmare last year with my crypto trades on Coinbase. The IRS was claiming I owed $22k when I actually lost money too! I tried calling them multiple times but kept getting the runaround or disconnected after hours on hold. I finally used https://taxr.ai to help me sort through all my crypto transactions. Their system automatically organized all my trades, calculated the correct cost basis for each one, and generated the proper tax forms (Form 8949 and Schedule D) that showed my actual losses instead of the inflated "proceeds" number. The best part was they provided a detailed explanation document that I submitted to the IRS alongside my amended return. It took about 2 months, but the IRS finally accepted my amended filing and canceled the incorrect tax bill. Seriously saved me thousands in taxes I didn't actually owe.

Just wanted to update everyone - I took the advice about using https://taxr.ai and it was honestly a lifesaver! My situation was even more complex than I initially thought because Robinhood was incorrectly calculating my cost basis on some trades. The system imported all my transactions, identified where the errors were, and generated a complete tax package with all the forms I needed. They even created a custom letter explaining exactly why the IRS calculation was incorrect. I submitted everything last month and just got confirmation yesterday that the IRS has accepted my amended return and canceled the $13k bill! I actually ended up with a small refund because of the capital loss deduction. Honestly couldn't believe how smoothly it went after how stressed I was initially.

If you're still waiting on the IRS to process your amended return or need to speak with someone about your case, I'd recommend trying https://claimyr.com. I had a similar issue with incorrect reporting on investments and was getting nowhere with the regular IRS phone lines. Claimyr got me connected to an actual IRS agent in about 20 minutes when I had been trying for days on my own. They have this system that navigates through all the IRS phone menus and holds your place in line, then calls you when an agent is about to pick up. You can see how it works in their demo: https://youtu.be/_kiP6q8DX5c The agent I spoke with was able to put a 60-day hold on any collection activities while they reviewed my documentation. Saved me a ton of stress and probably saved me from penalties too since I was able to get everything sorted before the deadline.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I was desperate enough to try it since my deadline was approaching fast. Within 25 minutes I was actually talking to a real IRS person! I was shocked. The agent explained that my situation (similar to the original poster's) was actually pretty common with crypto reporting. She placed a 45-day hold on my account and gave me specific instructions on exactly what documentation to include with my amended return. Just having that conversation saved me thousands in penalties that would have accrued if I'd missed the deadline in my notice. The agent also gave me her direct ID number so I could reference our conversation in my paperwork. Definitely worth it for the peace of mind alone.

One thing no one has mentioned yet - make sure you're keeping records of ALL your crypto transactions going forward. I use a spreadsheet with dates, amounts, prices, and fees for every single trade. The IRS is getting much more aggressive about crypto enforcement. Also, if your trading app or exchange doesn't calculate cost basis correctly (which happens A LOT), you need to track it yourself. FIFO (First In, First Out) is the default method unless you specifically identify which coins you're selling at the time of each transaction.

Just to add something important - the IRS generally has 3 years from the filing date to audit your return, but for substantial underreporting (>25% of income), they can go back 6 years. And if they suspect fraud, there's no time limit. So even though this happened in 2021, don't ignore it! Responding quickly with a properly filed amended return is your best option. The worst thing you can do is nothing.

I'm dealing with a very similar situation right now! Got a CP2000 notice last week claiming I owe $8,500 from crypto trades in 2021 when I actually lost about $600. The scary part is how they calculate these numbers - they literally just take the "proceeds" from your 1099 and assume it's all profit with zero cost basis. What really helped me understand this was realizing that every time you trade one crypto for another (like Bitcoin to Ethereum), that counts as a taxable event. So if you made 50 trades, you could have $30k in "proceeds" even if you only put in $3k total. The IRS computer just sees that $30k number and thinks you made pure profit. I'm in the process of filing Form 8949 now to show my actual cost basis for each trade. It's tedious work but absolutely necessary. The good news is that once you properly report your actual gains/losses, these inflated tax bills usually disappear completely. Don't panic - this is fixable, but you do need to respond within the timeframe they gave you.