The Crypto Tax Crackdown: Your Clients Are at Risk

In 2025, it's becoming increasingly difficult to hide in the shadows if you own cryptocurrency.

And if your clients are trading crypto, they’re probably unaware of just how much scrutiny they’re under.

Guess who’s going to get the late-night call when they find out the IRS is on to them?

You do.

The IRS is On to Crypto

Cryptocurrency, once relegated to your wacky neighbor living in his parents basement, has gone mainstream.

So of course that means government regulation with a strong side of enforcement.

Since 2019, taxpayers have been required to check a box if they are involved with digital assets.

That checkbox has now led to audits, penalties, and even criminal prosecutions.

How can you help your clients before the IRS shows up?

Your Clients Are Vulnerable

Most people don’t see crypto as “real” money—it’s just numbers on a screen.

That mindset leads to mistakes:

Mistakes like...

• Not reporting gains from casual trades, sales, or even receiving gifts.
• Not tracking cost basis, including when moving crypto between wallets or platforms.
• Ignoring taxable events like staking interest or NFT sales, among others.
• Believing things they hear in their chatrooms like “crypto isn’t taxable if it’s not cashed out.”

When your clients face IRS scrutiny, they’ll look to you for guidance and solutions.

Three Key Risks to Understand

1. Increased Enforcement

In 2026, the IRS will introduce the 1099-DA form, which will change the game for crypto reporting. Think of it as the W-2 for digital assets—except it’s retroactive.

If your clients haven’t been compliant in past years, this form will bring those issues to light.

2. Targeted Audits

Sophisticated investors with significant gains are the primary targets, but that doesn’t mean smaller players are safe. One mistake—like failing to report a $10,000 gain—can spiral into devastating scrutiny.

3. Criminal Penalties

In extreme cases, the IRS and DOJ are prosecuting and sending a message: crypto tax evasion isn’t just risky—it’s illegal.

Here’s what to tell your clients to do:

• Organize Records: Without detailed transaction logs, compliance is impossible.
• Understand the Rules: Help them understand the implications of common transactions.

TL;DR (Too Long; Didn’t Read)

• The IRS is cracking down on crypto taxes with new reporting requirements in 2026.
• Crypto isn’t “money” in people’s minds—it’s just numbers on a screen.
• People ignore taxable events, including staking and NFT transactions.

Let’s Talk…

Do your clients have crypto holdings?

Have you prepared them for increased IRS scrutiny?

If so, how?