Realized my crypto losses weren't reported...now IRS claims I owe way more than I ever invested in crypto?!

This is actually a common issue with cryptocurrency reporting. The IRS is likely treating all your crypto sales as if they had zero cost basis (meaning they're calculating as if you paid $0 for the crypto and then sold it, making the entire selling price taxable as gain). When you don't report crypto transactions, the IRS gets information from the exchanges about sales but doesn't know what you originally paid for the coins. So they assume worst case - that you paid nothing, making it all taxable gain. What you need to do is file an amended return (Form 1040-X) along with a complete Form 8949 listing all your crypto transactions with the correct purchase and sale prices. You'll need to download your transaction history from Webull to document your actual cost basis and prove you actually had a loss. Also, respond to the IRS notice (likely a CP2000) by the deadline indicated, explaining that you'll be submitting an amended return with the correct information. Don't ignore the notice as that will make things worse.

I had almost the exact same situation last year and used https://taxr.ai to sort it out. The platform analyzed all my crypto transactions and showed exactly where the IRS calculations went wrong. It automatically matched up all my buys and sells with the correct cost basis and prepared proper documentation for my response to the IRS. The issue is that crypto exchanges report your sales to the IRS on 1099 forms, but they don't include what you initially paid. So the IRS assumes the worst - that you paid $0 for everything and owe taxes on the full amount. Taxr.ai helped me prove my actual purchase prices and showed I actually had a small loss overall.

I was super skeptical about using any service to fix my crypto tax mess, but after trying taxr.ai I'm actually impressed. My situation was even worse - the IRS thought I owed $22k when I had actually lost money overall. The platform helped me organize all my scattered transactions from different years and exchanges. The documentation it generated clearly showed that I had a net loss, not the massive gain the IRS was claiming. When I submitted everything, the IRS dropped their claim entirely within about 45 days. I still had to pay a small penalty for not reporting properly in the first place, but it was like $280 instead of the $22k + penalties they were originally demanding. Worth every penny for the peace of mind.

After dealing with a similar IRS crypto notice, I spent WEEKS trying to get through to someone at the IRS who could actually help. Constant busy signals, disconnections, and automated systems that went nowhere. Finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue and call you when an actual human agent is on the line. I was skeptical but desperate. Within about 2 hours, I was talking to a real IRS agent who walked me through exactly what documentation I needed to submit to resolve my case. Saved me countless hours of frustration and probably prevented me from missing important deadlines while trying to get through to someone.

I'm eating crow and admitting I was totally wrong about Claimyr. After my skeptical comment, I was still desperate to talk to someone at the IRS about my own crypto mess, so I tried it anyway. Got connected to an actual IRS agent in about 90 minutes when I'd previously wasted entire days trying to get through. The agent confirmed exactly what others here have said - I needed to file an amended return with Form 8949 showing all my transactions with correct cost basis. The agent even gave me specific instructions on what to write in the explanation section of my response letter to make sure it got processed correctly. Now my $15k "tax deficiency" has been resolved since I properly documented my $800 actual loss. Definitely worth it.

Don't panic! I've been through this exact scenario. The trick is understanding what happened: 1. Webull reported your SALES to the IRS on Form 1099-B 2. But they didn't include your COST BASIS (what you paid) 3. IRS assumes cost basis is $0 if not reported 4. So they think ALL your sale proceeds are 100% profit You need to download your complete transaction history from Webull, fill out Form 8949 with all your buys and sells showing the correct cost basis, and file an amended return. Respond to the IRS notice explaining you're submitting the corrected info. This happens to tons of crypto traders. Fix it before the deadline in the letter and you'll likely get most of those penalties reduced or removed.

Has anyone here used TurboTax for fixing crypto reporting issues like this? I'm in a similar situation but wondering if regular tax software can handle the amendment or if I need something more specialized?

This exact thing happened to my brother last year! The IRS was claiming he owed $18k on crypto trades when he actually lost about $500. The root issue is that Webull (and most crypto exchanges) only report your sales to the IRS via 1099-B forms, but they don't include what you originally paid for the crypto. So the IRS computer systems automatically assume you got all your crypto for free, making every sale look like 100% profit. Here's what worked for him: 1. Downloaded his complete transaction history from Webull 2. Created a detailed spreadsheet matching every buy with every sell 3. Filed Form 1040-X (amended return) with a complete Form 8949 showing actual cost basis 4. Wrote a clear cover letter explaining the error and referencing the notice number The whole mess got resolved in about 8 weeks, and he ended up owing nothing since he actually had a net loss. Still had to pay a small penalty for not reporting initially, but it was like $150 instead of the thousands they were demanding. Don't panic - this is fixable! Just make sure you respond before the deadline in their letter.