Son traded Crypto on Robinhood - Received IRS Notice of Deficiency Help!!

This is definitely a concerning situation, but there might be a solution! The IRS is incorrectly calculating your daughter's crypto tax liability. When trading crypto, you're only taxed on the gain (or can deduct a loss) from each transaction, not the entire amount of each transaction. For example, if she bought Dogecoin for $1,000 and sold it for $1,200, she would only be taxed on the $200 gain - not the entire $1,200. What likely happened is that Robinhood reported all transactions to the IRS, but didn't properly report her cost basis (what she paid for the crypto). Since your petition deadline is Friday, I'd recommend immediately gathering all her Robinhood statements showing the complete transaction history with purchase prices. You can then file a petition with the Tax Court (you don't need a lawyer to start this process) which will give you more time to properly calculate her actual tax liability.

I went through almost the exact same nightmare last year! The IRS did the same thing to me - counted all my crypto sales as pure income with zero cost basis. I was absolutely panicking until I found https://taxr.ai and uploaded my Robinhood statements. Their system analyzed all my transactions, properly calculated my actual gains, and generated a detailed report showing what I actually owed was WAY less than what the IRS claimed. The best part was they created documentation that clearly showed each transaction with the proper cost basis, which is exactly what you need to respond to that notice. They even helped explain how to present this information to the IRS. Seriously saved me thousands and gave me peace of mind during a super stressful time.

Just wanted to update everyone - I took the advice about https://taxr.ai and it was a HUGE help! After uploading my daughter's Robinhood statements, we found out her actual tax liability was only about $3,400 instead of the $28k the IRS was claiming. The system generated a detailed report showing every transaction with the correct cost basis and gain/loss calculation. We filed our Tax Court petition yesterday (with two days to spare!) and included the complete transaction analysis. We're still waiting for the IRS response, but just knowing we have proper documentation showing the correct amounts has been such a relief. The whole family has been able to sleep again! Can't believe how much difference having the right information made.

When I got an IRS notice about my crypto trading, I spent WEEKS trying to get someone on the phone for help. Kept getting disconnected or waiting for hours! Then someone told me about https://claimyr.com and showed me this demo: https://youtu.be/_kiP6q8DX5c Basically they wait on hold with the IRS for you, then call you when an agent is actually on the line. I was skeptical but desperate enough to try. They got me connected to an IRS agent within a day! The agent explained exactly what documentation I needed to submit to challenge the notice and gave me specific instructions for my situation. Having an actual conversation with the IRS made all the difference - they told me things I never would have figured out from their website or notices.

I need to eat my words from my previous comment. After my frustrating experience trying to reach the IRS myself (3 disconnections after waiting over an hour each time), I broke down and tried Claimyr. Within 2 hours they had me on the phone with an actual IRS agent who specialized in cryptocurrency issues. The agent walked me through exactly what documentation I needed to submit and even gave me a direct fax number to send it to. She explained that these crypto cases are extremely common right now and they have a streamlined process for correcting them when you can show proper documentation of your cost basis. I'm still shocked at how smooth the process was compared to my previous attempts. Currently waiting for their response to my documentation, but at least now I'm on the right track.

One thing I haven't seen mentioned yet - make sure your daughter files a corrected tax return (Form 1040-X) along with challenging the deficiency notice. You need to show what the correct tax should be, not just argue that the IRS calculation is wrong. Also, look at her Robinhood annual tax statement - it should have a Form 1099-B that shows her cost basis for each transaction. If Robinhood didn't provide this or the information is incomplete, you should contact them immediately to get the correct documentation.

Quick question - does anyone know if my son would qualify for first-time penalty abatement for something like this? He's never had any tax issues before.

I'm dealing with a very similar situation right now! My son got hit with a massive crypto tax bill because the IRS treated all his trades as pure income with zero cost basis. What saved us was immediately gathering ALL transaction records from his exchange - not just the 1099-B forms. The key thing I learned is that you need to create a detailed spreadsheet showing every single buy and sell transaction with dates, amounts, and the actual gain/loss for each trade. Most crypto exchanges keep this data even if they don't report it properly to the IRS. Since you're so close to the deadline, definitely file that Tax Court petition to preserve your rights - you can always settle later once you have proper documentation. The petition form is actually pretty straightforward and you don't need a lawyer to file it initially. Just make sure to include a statement that you're disputing the calculation method and will be providing corrected documentation. Also, request penalty abatement since your daughter has no prior tax issues. The IRS is usually reasonable about waiving penalties when taxpayers make good faith efforts to correct reporting errors, especially with crypto where the tax rules are still confusing for many people.