IRS Crypto Audit Defense & Notice Representation
Received an IRS Notice About Cryptocurrency?
Monaco CPA, a cryptocurrency tax firm in Livingston, New Jersey, provides IRS audit defense and notice representation for digital asset investors nationwide. Gregory Monaco, CPA, MBA represents clients directly before the IRS—you never have to speak to an agent yourself.
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Typical Response Deadline: 30 days from notice date
Do Not Contact the IRS Without Representation
When you receive an IRS notice about cryptocurrency, your first instinct may be to call and explain. This is a mistake.
Attempting to explain complex crypto transactions—hard forks, liquidity pools, DeFi bridging—to an IRS agent without preparation can lead to:
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Accidental admissions that increase your liability
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Mischaracterizations recorded in your case file
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Waived rights you didn't know you had
Our approach: We file Form 2848 (Power of Attorney) immediately, routing all IRS communication through our office. You deal with us. We deal with them.
Types of IRS Crypto Notices We Handle
What Is a CP2000 Notice?
A CP2000 Notice (Automated Underreporter) means the IRS received information from an exchange (Form 1099-K, 1099-B, or the new 1099-DA) showing cryptocurrency "proceeds" but no corresponding "cost basis" on your tax return.
The Problem: The IRS assumes your cost basis is zero, treating your entire sale as taxable gain.
Our Solution: We reconstruct and document your actual cost basis, often reducing the proposed liability by 90% or more—frequently to $0.
What Is Letter 6173?
Letter 6173 is a serious compliance inquiry. The IRS believes you have unreported cryptocurrency accounts and requires a mandatory response with documentation.
Our Solution: We draft sworn statements, reconstruct transaction histories, and compile evidence packages to satisfy the inquiry.
What Is Letter 6174 or 6174-A?
Letters 6174 and 6174-A are "soft warning" educational notices encouraging you to review your tax returns for cryptocurrency compliance.
Our Solution: We audit your past filings to identify and correct any issues before the IRS escalates enforcement.
What Is Form 4549 (Examination Changes)?
Form 4549 is issued after an IRS examination, proposing specific tax changes based on the auditor's findings.
Our Solution: We appeal findings where IRS agents misunderstood cryptocurrency mechanics (common with self-transfers, bridges, and DeFi transactions).
Our IRS Representation Process
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Power of Attorney (Form 2848): Filed immediately to direct all IRS communication to our office
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Collections Hold Request: We request suspension of collection activity while investigating
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Data Reconstruction: We gather wallet logs, exchange CSVs, and blockchain records to establish facts
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Technical Response: We draft a formal response citing tax law, attaching reconciled Form 8949 and supporting documentation
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Appeals or Settlement: If needed, we negotiate payment plans, penalty abatement, or represent you in IRS Appeals
Why Crypto Tax Expertise Matters for Audit Defense
A generalist CPA or enrolled agent may not understand:
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Why a hard fork creates different tax treatment than an airdrop
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How a transfer to a liquidity pool differs from a taxable sale
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What constitutes a "taxable event" in wrapped token transactions
IRS examiners often don't understand these distinctions either. Our role is to educate the examiner, presenting blockchain evidence that proves a transaction was a non-taxable bridge—not a taxable trade.
2025–2026 Enforcement Landscape
The IRS has significantly increased cryptocurrency enforcement:
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Form 1099-DA reporting begins for 2025 transactions (issued in 2026)
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John Doe summonses to exchanges continue expanding
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Coinbase, Kraken, and Circle have disclosed user data under legal compulsion
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Revenue Procedure 2024-28 establishes wallet-by-wallet cost basis requirements
This heightened scrutiny means more notices, more audits, and higher stakes for non-compliance.
Frequently Asked Questions
Should I just pay the CP2000 amount to make it go away?
No. CP2000 notices assume zero cost basis, dramatically overstating your liability. We frequently reduce these amounts by 90% or more by proving your actual purchase prices.
Can I handle an IRS audit myself?
Technically yes, but anything you say can be used against you. If you accidentally describe a "trade" as "payment for services," you might trigger self-employment tax. Professional representation protects you from self-incrimination.
Do I need a tax attorney instead of a CPA?
CPAs can represent you before the IRS for audits and notices. If your case involves potential criminal exposure (fraud allegations, willful evasion), we will refer you to a qualified tax attorney who can provide attorney-client privilege.
Does the IRS really understand cryptocurrency?
Increasingly, yes. The IRS has trained specialized agents in digital asset taxation. However, examiners still frequently misclassify legitimate non-taxable transfers. Expert representation corrects these errors.
Protect Your Rights and Your Wealth
The IRS has teams of attorneys and data analysts. You deserve expert representation too.
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Schedule an Emergency Consultation →
Phone: (862) 320-9554
Email: Greg@MonacoCPA.CPA
Location: Livingston, New Jersey (representing clients nationwide)
© 2025 Gregory Monaco, CPA LLC. All Rights Reserved.