IRS sent me a $14,000 tax bill for crypto and stocks I didn't profit on - HELP!

This is a classic case of basis reporting issues. The IRS is likely treating all your sales as having $0 cost basis (what you originally paid), which is why they think you made $50K more than you did. What probably happened is that your exchange or broker didn't properly report your cost basis to the IRS on their 1099 forms. This is super common with crypto transactions and some stock platforms. The IRS gets the gross sales amount (your 1099-B or 1099-K) but doesn't see what you paid originally. Don't panic! This is fixable. You should respond with a formal letter explaining the situation and include all your transaction records showing your purchase prices and dates alongside the sales. Include a detailed spreadsheet showing each transaction, the purchase price, sale price, and actual gain/loss. For crypto especially, make sure you have records of every transaction. If you used multiple exchanges, gather statements from all of them. The burden of proof is on you to show your basis, but with good documentation, you can absolutely get this resolved.

Been through almost the identical situation last year! After weeks of stress and getting nowhere with the IRS phone lines, I found this service called taxr.ai (https://taxr.ai) that specifically handles crypto and stock tax issues. They have a tool that analyzes your trading history and IRS notices to identify exactly what the IRS is missing. I uploaded my transaction history from Coinbase and Robinhood, along with the IRS notice, and they generated a detailed response letter showing my actual gains were only about $3K, not the $45K the IRS claimed. They also helped format everything exactly how the IRS wants to see it, which apparently makes a huge difference in how quickly they process it. The whole process was way less stressful than trying to figure it all out myself, and the IRS accepted my documentation without any additional questions.

I just wanted to update everyone. I went ahead and tried taxr.ai after seeing it recommended here. The process was surprisingly straightforward - uploaded my Coinbase and Kraken transaction histories, plus screenshots from the smaller exchanges I'd used. Within 3 days they sent me a complete response package that showed my actual gains were $3,850, not the $52,000 the IRS was claiming. The documentation clearly showed every transaction with its proper basis. They also included a formal letter citing the specific tax codes that applied to my situation. Sent everything to the IRS as they recommended, and JUST got the response yesterday - they accepted all my documentation and reduced my tax bill from over $15K to just $890! Such a relief after months of stress. Would definitely recommend for anyone dealing with crypto tax nightmares.

For those struggling to get through to the IRS about this issue - I was in the same boat trying to explain my crypto transactions for WEEKS. Kept calling their number only to get disconnected or wait on hold for hours. Finally used Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes. They have this system that navigates the IRS phone tree and holds your place in line, then calls you when an agent is about to pick up. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent I spoke with was actually super helpful and explained exactly what documentation I needed to submit to resolve my case. Having that direct conversation saved me from sending in the wrong paperwork and delaying things even more.

I need to apologize for calling Claimyr a scam. After reading more about it, I decided to try it as a last resort since I was getting absolutely nowhere with the IRS regarding my cryptocurrency tax issues. Used the service yesterday morning and got connected to an IRS agent within about 30 minutes. The agent was able to see that there was indeed a discrepancy between what was reported to them versus what I actually owed. They explained exactly what forms I needed to submit (Form 8949 with all my transactions properly listed) and gave me a direct fax number to send the documentation. They also put a 60-day hold on any collection activities while I gather and submit my proof. This was after spending 3 weeks trying to get through on my own with no success. Definitely worth it just for the peace of mind of talking to an actual person at the IRS.

Something similar happened to my brother. It's because the exchanges report to the IRS on a 1099-K (for crypto) or 1099-B (for stocks) showing the gross proceeds from sales, but often don't include your cost basis. So the IRS assumes your basis is $0 and taxes you on the entire amount. Make sure you fill out Form 8949 with ALL your transactions, showing the correct cost basis for each one. Then submit it with a written explanation. If you're dealing with a LOT of transactions, you can summarize them but be prepared to provide details if asked.

I had this nightmare last year! What worked for me was: 1) Don't ignore it, definitely respond within the timeframe on the notice 2) Get ALL your transaction records together - every purchase and sale 3) Create a spreadsheet showing date purchased, purchase price, date sold, sale price, and gain/loss for each transaction 4) Complete Form 8949 correctly - this is super important 5) Write a clear letter explaining the error If you have a ton of transactions, the IRS actually allows you to attach a spreadsheet instead of listing each one on separate 8949 forms. Just make sure the spreadsheet has all the required columns from the form.