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You do not want your first serious look at your crypto records to be after an IRS agent calls. By then, you are reacting, not controlling the outcome.
For high earners and business owners, the risk is higher than you might think. The IRS has ramped up digital asset enforcement and is using new data feeds, including the IRS crypto audit programs tied to exchange reporting.
With the right structure, you can turn a possible threat into another part of your broader plan for clarity, growth, and protection.
Why High Earners Are In The Crosshairs Of An IRS Crypto Audit
If you run a company over 5 million in revenue or manage significant personal wealth, the IRS sees you as a high-impact case. Add active trading, DeFi income, or NFT activity on top of that and you move closer to the audit list.
Recent data shows crypto audits rising sharply, with billions in extra tax collected. Major exchanges like Coinbase and Kraken now report your trades directly. New rules around Form 1099-DA for 2025 transactions give the IRS even more detail to compare with your return.
In other words, if you treat crypto as a side hobby while your income is on the radar, the gap between your return and third-party data can invite questions.
What The IRS Actually Looks For In Your Crypto Activity
You prepare better when you understand what flags attention. IRS guidance and recent enforcement trends point to several recurring triggers, echoed in resources like top tips on IRS crypto audit preparation in 2025.
Common triggers include:
- Large or frequent transfers between wallets and exchanges
- Use of privacy coins or mixers
- Unreported income from mining, staking, or DeFi
- Missing or weak cost basis records
- Mismatches with forms issued by exchanges, including Form 1099-DA
Here is a quick reference:
| Audit trigger | How to prepare |
|---|---|
| Big wallet and exchange transfers | Label wallets and document the purpose of each movement |
| Privacy coins or mixing services | Keep full internal logs, including source and destination |
| Mining, staking, airdrops, NFTs | Track income on the day received, in dollars |
| Poor cost basis records | Use software or a CPA to track cost per wallet |
| 1099-DA does not match your return | Reconcile every reported sale before you file |
Form 1099-DA is especially important. Starting with 2025 activity, centralized platforms will send it to both you and the IRS when your digital asset sales exceed certain thresholds, often as low as 600 dollars. If your return does not match, the system can flag you automatically.
Build An Audit-Ready Crypto Recordkeeping System
Your best defense is a clean, consistent record system that you can explain without stress. Think of it as building a file a future IRS agent would find boring because everything ties out.
At a minimum, you should keep for every transaction:
- Date and time
- Type of activity (buy, sell, swap, stake, lend, borrow, airdrop, NFT mint or sale)
- Quantity and asset
- Dollar value at the time
- Cost basis and gain or loss
- Wallet or exchange used, including internal transfer links
For 2025 and beyond, the IRS expects wallet-by-wallet cost basis tracking, not just one blended pool across platforms. That means you track what you paid for assets in each wallet separately.
Many high-net-worth investors now pair crypto tax software with a dedicated adviser. Tools help pull data from exchanges, but they often fail on DeFi or older activity. A human review is still important if you have years of trades, yield farming, or NFT deals.
If you want more detail on how new forms may change your records, the discussion of how Form 1099-DA affects crypto traders in 2025 and 2026 offers good background.
Fix Past Crypto Reporting Before The IRS Calls
If you have gaps from prior years, waiting rarely helps you. The longer the problem sits, the harder it is to reconstruct wallets, private keys, and old exchange exports.
Common issues include:
- Ignoring trades because “it all stayed in crypto”
- Treating every move as a deposit or withdrawal instead of a taxable swap
- Forgetting mining, staking, or interest income
- Misreporting NFTs or DeFi as simple capital gains
Tax law gives you tools to clean this up. Amended returns can correct earlier filings. In more serious cases, voluntary disclosure paths can reduce penalties when you come forward before the IRS reaches out.
Articles such as this piece on how IRS crypto audits are increasing and common mistakes taxpayers make show how costly simple record errors can be. For you, the question is not whether an error exists, but how quickly you want it off your risk list.
Coordinate Crypto With Your Business Tax And Estate Plan
If you own operating companies, your crypto decisions touch more than one part of your financial life. You may hold tokens in your personal name, inside a fund, in a holding company, or on your company balance sheet. Each creates different Business Tax and legal results.
For example:
- Crypto used to pay vendors or staff is a business event
- Company-held tokens may need separate books and GAAP treatment
- Moving coins into a trust or family entity changes estate and gift planning
This is where a full-service team under one roof can help. At Herbert Financial, Tania Herbert and the advisory team focus on tax strategy, retirement planning, and estate design that work together instead of in silos. When your crypto sits next to 401(k)s, cash balance plans, trusts, and operating companies, you want one coordinated plan for tax, growth, and asset protection.
Whether you work with a tax accountant Los Angeles based, a tax accountant San Diego, or another adviser across the country, you want someone who knows digital assets and advanced planning, not just vanilla returns.
When To Bring In A Specialized Crypto Tax Team
You should not wait for an IRS letter before involving experts. For high earners, the cost of a weak response is far greater than the fee for strong advice.
Consider working with specialized tax advisors Los Angeles business owners use when:
- Your crypto activity spans several years, wallets, and DeFi platforms
- You run a company and accept or hold digital assets
- You have meaningful unrealized gains and are thinking about exits or gifts
- You split time or business across states like California, Nevada, and Arizona
You may already have a trusted CPA who handles your traditional filings. That person might partner well with a tax consultant Los Angeles firm that lives in the crypto space every day. The same goes if you rely on a tax accountant Las Vegas for Nevada activity or a tax consultant Phoenix for Arizona holdings. Coordination matters.
Herbert Financial is based in California but supports clients in all 50 states. With a team that covers tax, retirement, estate, and business advisory, you get one place to align your crypto reporting with the rest of your balance sheet, instead of piecing advice together.
Schedule your appointment to review your current crypto records and overall tax posture. Reach out to learn more.
Protect Your Wealth Before The IRS Crypto Audit Starts
An IRS crypto audit does not have to catch you off guard. When your records are clean, your story is consistent, and your crypto fits neatly inside your larger wealth plan, the process becomes far less stressful.
You now have a clear picture of what the IRS looks for, how to build audit-ready records, and when to correct past issues. Most important, you see how digital assets connect to Business Tax, retirement, and estate planning, not just to a single line on your return.
Treat this as part of your broader goal of financial clarity. If you act before the letter arrives, you keep control of the timeline, the narrative, and the outcome.
