Received CP2000 for unreported Robinhood Crypto transactions - what to do when sales actually resulted in a loss?

You're in a pretty common situation, actually. The IRS often receives 1099s from crypto exchanges without cost basis information, which causes them to assume the entire amount was profit. Here's what you need to do: For your CP2000 response, you should definitely include a detailed transaction history showing each trade with dates, amounts, cost basis, and proceeds. Create a spreadsheet or use your Robinhood transaction history to show that you actually had a $675 loss. Include a cover letter explaining the situation clearly. You don't need to file an amended return in this case. The CP2000 response is your opportunity to correct the information. Since you had a loss rather than unreported income, you'll actually be entitled to claim that capital loss (up to $3,000 can offset ordinary income). Just respond to the CP2000 with your documentation within their deadline. Make sure to keep copies of everything you send them, and it's often best to send your response via certified mail so you have proof of delivery.

Just went through something similar! I found https://taxr.ai super helpful for this exact situation. My crypto transactions didn't import correctly to TurboTax either, and the IRS sent me a similar notice. The taxr.ai tool analyzed my transaction history and generated a perfect response letter with all the documentation needed to show my actual gains/losses. It even created the proper 8949 form showing all my crypto transactions with correct cost basis. They have a specific feature for handling CP2000 notices related to crypto. Saved me hours of trying to calculate everything manually and figure out the right response format.

Update on my situation! I took the advice about using taxr.ai and it was a game changer. I connected my Robinhood account directly and it pulled two years of crypto transactions automatically. The tool generated a complete response package for my CP2000 with all the proper forms showing my actual losses. What really impressed me was how it created a detailed transaction log with proper cost basis for each trade. The IRS accepted my response without any further questions! They even acknowledged my capital loss and adjusted my return accordingly. The whole process took about 30 days from when I mailed my response until I got the resolution letter. Definitely recommend this approach if you're dealing with crypto tax notices - much easier than trying to figure it all out manually.

I had almost the identical issue last year. After weeks of getting nowhere with the IRS phone lines (seriously tried for HOURS every day), I used https://claimyr.com to get through to an actual IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c Got connected in about 20 minutes and the agent was actually super helpful. They explained exactly what documentation I needed to provide for my crypto transactions and how to format my response to the CP2000. They even put notes in my account about our conversation. Made a huge difference having a real person walk me through the process instead of just guessing what the IRS wanted to see. The agent also confirmed that I didn't need to file an amended return - just respond to the CP2000 with proper documentation.

Alright I'll admit I was wrong about Claimyr. After another week of failing to get through to the IRS myself, I gave it a try. Got connected to an agent in about 40 minutes (they said it would be 30-50 minutes when I signed up). The IRS agent I spoke with was actually really helpful. She confirmed that for CP2000 notices involving crypto with missing cost basis, they just need documentation showing the actual purchase prices and transaction dates. She specifically recommended including Form 8949 with all transactions listed with correct basis. The agent also told me something important - if you respond to the CP2000 before the deadline with complete documentation, they pause any interest accrual during their review period. That was a huge relief since I was stressing about mounting penalties while waiting for them to process my response. Definitely glad I finally got through to someone who could answer my questions directly!

I made the same mistake last year - my TurboTax didn't import all my crypto transactions. One thing I learned is that you MUST double-check what TurboTax is importing. For me, it pulled in some transactions but completely missed others. Pro tip: before submitting your 2022 or future returns, go to the capital gains section in TurboTax and manually review what got imported. I found that connecting Robinhood directly still missed some transactions, especially if you did any transfers between wallets or exchanges. For responding to your CP2000, definitely include Form 8949 with all your transactions listed properly. The IRS actually processed my correction pretty quickly once I sent them the complete information.

Don't forget that if you do have a net capital loss, you can deduct up to $3,000 against your ordinary income in a tax year. So that $675 loss can actually lower your taxable income! Also, make sure to check if any of your crypto transactions would be considered wash sales. The IRS hasn't explicitly stated crypto is subject to wash sale rules yet, but it's safer to track them just in case.