🚨CRYPTO INVESTORS: DO NOT SCAN THIS QR CODE A fake IRS notice is being mailed to crypto holders directing them to a bogus “Digital Asset Compliance Portal.” It looks very convincing. It isn’t real. Please spread the word.

I’ve been waiting far too long to play this one… ₿itcoin’s finally given me the excuse. 😂 Happy Friday! 🍻

What actually happens when the U.S. sanctions a crypto exchange? The recent BitBank case is a useful example. The U.S. Treasury's Office of Foreign Assets Control designated the Iranian digital asset exchange BitBank under sanctions authorities relating to Iran. For a sanctioned Iranian digital asset exchange, property within U.S. jurisdiction or under the control of U.S. persons can be blocked, and U.S. persons generally cannot transact with it unless authorized. The consequences can extend beyond the United States. Foreign financial institutions that conduct certain significant transactions with designated Iranian exchanges can also face sanctions, including restrictions involving their U.S. correspondent banking relationships. That matters because access to the U.S. financial system remains enormously important to international finance. Crypto may operate globally. Sanctions do too.

When you leave crypto on an exchange, insolvency isn't the only risk you're taking. The U.S. Treasury has sanctioned BitBank, an Iranian digital asset exchange it says was used to transfer hundreds of millions of dollars' worth of Bitcoin to Iran's Islamic Revolutionary Guard Corps. That creates another type of third-party risk for crypto investors: sanctions risk. We saw with FTX what can happen when an exchange has serious problems behind the scenes. Sanctions are different, but the lesson is similar. When your assets are held by a third party, you're exposed not only to the financial health of that company, but also to what that company is doing and the regulatory consequences that can follow. That's another risk crypto investors need to understand when deciding where they hold their assets.

One of the most important parts of the Digital Asset Tax Certainty Act may have nothing to do with the $10 rule. The bill directs the Treasury Department to establish a voluntary disclosure program specifically for digital assets. In simple terms, this would create a pathway for taxpayers with previously unreported crypto activity to come forward and correct past tax issues. The proposed framework includes amended returns, tax and interest owed, and different penalty treatment depending on the taxpayer’s circumstances and when they enter the program. That could make this provision extremely important for people who have years of unreported crypto activity. The details matter enormously. A voluntary disclosure program sounds like relief, but taxpayers would need to understand exactly how far back it reaches, what penalties apply and what protections they receive before deciding whether to use it.

One provision in the new Digital Asset Tax Certainty Act caught my attention: a proposed $10 de minimis rule. But it’s important to understand what that actually means. The proposal would generally prevent recognition of a gain or loss when digital assets are used to pay certain qualifying network or transaction fees of $10 or less. That is not the same as saying every crypto transaction under $10 becomes tax-free. And there is still a practical question. You may still need accurate transaction records to determine what qualifies and properly account for your crypto activity. So while a de minimis rule may reduce some reporting friction, a $10 threshold is a fairly narrow change in the context of the wider crypto tax problem.

A major crypto tax bill just moved forward in Congress. The House Ways and Means Committee has approved the Digital Asset Tax Certainty Act, H.R. 10357. It covers a wide range of digital asset tax issues, including reporting, accounting, mining and staking, transaction fees, and a proposed voluntary disclosure program. But approval by the committee does not mean these rules are the law. The bill has now been ordered reported to the House, so there are still legislative steps ahead. For crypto investors, this is one worth watching because some of these proposals could significantly change how digital assets are treated for tax purposes. More to come!

One crucial but often overlooked factor when a crypto investor dies is the step-up in basis. So what is it? Your cost basis is generally the price you originally paid for an asset. If you hold that asset over time and it gains value, that growth may be subject to capital gains tax when you sell it. But here’s the key: If you die while still owning the asset and it passes to an heir, say your son, he generally doesn’t inherit your original cost basis. Instead, the asset’s basis is generally reset to its fair market value on the date of death. That can effectively eliminate the capital gain that built up during your lifetime. For example: You bought Bitcoin for $20,000. It’s worth $100,000 when you die. Your heir generally receives a basis of $100,000. If they sell it immediately for around $100,000, there may be little or no capital gain to report. Now imagine the same principle with a family farm, land, a business or a large crypto portfolio that has appreciated substantially over decades. Without step-up in basis, an heir could potentially inherit the deceased owner’s much lower historical cost basis. If the asset then had to be sold, the taxable gain could be dramatically larger. And for sufficiently large estates, estate tax can also become a separate consideration. For people dying in 2026, the federal estate and gift tax basic exclusion amount is $15 million per individual. The Biden Administration Proposed Ending Step-Up for Large Gains This isn’t hypothetical. In 2021, President Biden’s American Families Plan proposed ending step-up in basis for gains above $1 million per person, or up to $2.5 million per couple when combined with the existing real-estate exclusion. Under the proposal, appreciated assets above those thresholds could have triggered capital gains taxation rather than allowing all of the pre-death appreciation to disappear through a step-up in basis. The administration also proposed protections for family-owned businesses and farms transferred to heirs who continued operating them. The proposal ultimately did not become law. So today, in 2026, step-up in basis remains part of the U.S. tax code. And That Matters for Crypto Investors Crypto investors can build enormous unrealized gains over a lifetime. Someone who bought Bitcoin at $1,000, $5,000 or $10,000 could eventually be sitting on assets worth many times their original cost. The difference between inheriting that original basis and receiving a basis based on the asset’s value at death can be enormous. That is why estate planning isn’t something crypto investors should only start thinking about when they are elderly. Your cost basis, wallets, records, beneficiaries and estate structure can determine what actually happens to the wealth you spent decades building.

🚨Just Got Scammed? If you lost money to a crypto scam, you don’t have time to sit in denial. Here are the first 4 things you need to do in the next 30 days: 1. Admit it happened Sounds basic. It’s not. Most people lose more money trying to “get it back” than they lost in the original scam. Recovery scams are waiting for you. 2. File a complaint at IC3.gov This is the FBI’s system. No, it doesn’t magically get your money back. Yes, it creates an official record. And that matters later. 3. Gather every piece of evidence - Wallet addresses - Transaction IDs - Emails - Messages - Screenshots If you don’t document it now, you won’t be able to prove it later. And trust me, the IRS is going to ask. 4. Lock everything down - Change passwords. - Secure accounts. - Assume your data is compromised. Because it probably is. Most people do none of this. Then a year later they’re sitting in front of a tax problem they don’t understand, trying to explain a scam with no proof. That’s when it gets expensive.

A few weeks back, former presidential candidate Andrew Yang, who is now the CEO of a company called Noble in California, has made a proposal about artificial intelligence and job loss. His argument is that artificial intelligence is going to cause a lot of people to lose their jobs. If people are no longer able to work, they will need some kind of compensation. He refers to this as a Freedom Dividend. To pay for this, Andrew Yang has proposed taxing robots. The idea is that robots should be taxed because they are the ones displacing human labor. I disagree with his position, but I think it is worth discussing. This is basically a socialist proposal. Andrew Yang is very creative at repackaging some of these ideas, which is why I think it deserves attention. The U.S. Constitution, through the Sixteenth Amendment, gives the federal government the right to tax income. Robots do not have income. Therefore, you cannot tax a robot’s income. What they would likely do instead is tax the services rendered by the robot. But now you are getting into a serious level of complexity. At the federal level, you can tax a company on the income it generates. But trying to tax that company differently based on the type of labor it uses is a very difficult position to support. And ultimately, let’s face it: anytime you tax a company, the company adds that tax to the cost of the goods or services it sells. So the person who ends up paying that tax is the consumer. That means the more you tax companies, the more you may need to increase universal basic income payments so people can afford the higher costs created by those taxes. That is the vicious cycle being created here. This is the fallacy of a socialist government strategy. It assumes that the federal government is a more efficient distributor of wealth than individuals themselves. I think that is a fundamentally flawed principle. Rather than creating new taxes and then redistributing the money, the focus should be on eliminating waste and reducing how much taxation is needed in the first place.

🚨Crypto investors: which risk would you rather take? Option 1: Keep your crypto on the exchange. You buy and sell in one place, with no deposits or withdrawals between wallets. Tax reporting should be much simpler, and your 1099-DA should be easier to reconcile. But your assets stay in the custody of the exchange. Option 2: “Not your keys, not your coins.” You buy crypto, withdraw it to self-custody, then move it back to an exchange when you want to sell. You control your assets. But now your transaction history is spread across exchanges and wallets, cost basis becomes harder to track, and your 1099-DA may not show the full picture. So which do you choose? Easier tax reporting + exchange custody or Self-custody + more complicated tax reporting?

A lot of people have asked about the new 1099-DA forms: How much mismatched data do we expect between what traders report and what exchanges report, and who’s going to pay the price for those mismatches? The first year has proven very problematic. Exchanges are only reporting the proceeds of each transaction. They are not reporting cost basis. That means the IRS will see totals for proceeds, but not what you actually paid for the asset. Your reported gains and losses may look very different from what the IRS data suggests, and that will cause confusion. Here’s where the risk begins. Some taxpayers may ignore their 1099-DAs entirely because the form is confusing or looks incomplete. That’s a mistake. The IRS’s electronic filing system automatically detects whether a 1099-DA that was issued has been entered on your tax return. If you fail to include it, you’re likely to get a computer-generated audit notice. So you must enter every 1099-DA, and then you must make the necessary adjustments on Form 8949 to correct the missing or inaccurate information. The key is this: You must report at least as much total proceeds as the IRS is expecting to see from the 1099-DAs. If you report less, a mismatch occurs, and that can trigger an audit. We may see the same kind of chaos that happened years ago with the rollout of early 1099-K reporting. Low-quality data, massive confusion, and thousands of false-positive audits. We think that scenario is very possible here. The IRS may initiate significantly more computer-generated audits simply because: • taxpayers fail to report the 1099-DAs, • the form is confusing, • accountants aren’t familiar with the rules, and • exchanges provide incomplete data. In many cases, people will end up responding to audits just to explain that the issue came from the structure of the form itself, not actual underreporting.

The IRS uses 1099 forms, known as information returns, to track how much income you earn. You’ve seen them before. Banks, investment firms, employers, and even side jobs all issue 1099s. They’re straightforward. Your name, your income, any tax withheld. You take that information and enter it into your tax return. Simple enough. Then came Form 1099-DA. Let’s just say the rollout has been problematic. The form collects data, but it doesn’t actually help the taxpayer. Most people have no idea how to take 1099-DA information and correctly report it on their tax return, especially if they’re self-filing using software like TurboTax. We’re also seeing cases where tax professionals are refusing to deal with it altogether. Some accountants are declining clients simply because of the complexity introduced by 1099-DA. Think about that. An IRS reporting form is now causing taxpayers to lose access to their accountants. Why? Because the form is confusing. The information is technically there, but it’s buried, fragmented, and difficult to interpret. It’s not presented in a way that clearly tells the taxpayer what needs to go on the return. As a result, mistakes are inevitable. It wouldn’t be surprising to see a very high error rate when people attempt to report 1099-DA data, whether they’re doing it themselves or working with a professional. That creates a new problem for the IRS. A flood of inaccurate tax returns. When that happens, the IRS isn’t just dealing with non-compliance. They’re dealing with confusion at scale. That leads to mismatches, incorrect notices, and audits triggered by flawed data. So while the system is trying to improve reporting, it may actually create more noise in the short term. One thing doesn’t change. The IRS will still pursue people who fail to report their crypto income. They’ll just be doing it in an environment where a lot of the data they’re relying on is messy, inconsistent, and difficult to interpret.

A lot of people are struggling with Form 1099-DA, especially when they have multiple exchanges and are also using crypto tax software. The numbers don’t match, and that’s where the confusion starts. You do need to account for all your 1099-DAs on your tax return. The IRS sees this data when your return is electronically filed, so you want to show that you considered it. But you should not rely on it as your final calculation. Instead, you adjust it. On Form 8949, you subtract out the gains reported on the 1099-DAs as an adjustment, and then replace those numbers with the output from your crypto tax software. That result is typically more accurate. Why? Because the 1099-DA is often wrong or incomplete. And that’s not entirely accidental. The reporting rules that brokers follow are different from the rules you, as a taxpayer, must follow. Here’s a simple example. Let’s say you bought Ethereum two years ago and moved it to a private wallet. Later, you bought more Ethereum on Coinbase. Then you move your older Ethereum back onto Coinbase. Coinbase does not know the original cost basis of that older Ethereum. So when you sell, Coinbase assumes you are selling the assets with unknown cost basis first. That often gets reported as a short-term gain. But in reality, that asset may be long-term, which has very different tax treatment. And here’s the key point: Under the tax rules you must follow, you are required to use your actual acquisition dates and cost basis, not what the exchange reports. So your reporting can legitimately differ from the 1099-DA. That’s why the numbers don’t match. The 1099-DA is not a complete or authoritative record. It’s a partial snapshot based on limited data. Your job is to report the correct capital gains based on your full transaction history. So yes, include it. But adjust it. And rely on your own records and software to get to the correct answer.

Form 1099-DA is becoming a major issue as people approach filing deadlines. Everyone is confused. And honestly, even tax professionals are struggling with it. With most 1099 forms, it’s simple. Each box maps clearly to a specific place on the tax return. Box 1 goes here, Box 2 goes there. Straightforward. That’s not how the 1099-DA works. Instead, it lists a large amount of detailed, broken-down data without clearly showing which totals belong in which boxes on the tax return. So preparers are forced to manually piece it together, adding up numbers just to figure out what to report. That’s where the problems start. For example, one Coinbase 1099-DA showed long-term capital gains with a cost basis that didn’t clearly match the underlying detail. At the same time, stablecoin transactions were separated from other short-term activity, even though they can function the same way. So now you have multiple categories, unclear totals, and no obvious mapping into tax software. And that creates a real issue. Tax software expects clean, summarized inputs. But the 1099-DA provides fragmented data. So accountants are left guessing which numbers belong where. If professionals are confused, taxpayers don’t stand a chance. In fact, one taxpayer was told by their preparer: “I’m not doing this. You’re on your own.” That’s not rare. Many high-volume preparers rely on speed. They expect to complete a return in about an hour. Just figuring out a 1099-DA can take longer than that. The result is obvious. More errors. More inconsistent reporting. More headaches for both taxpayers and the IRS. The form does a great job of giving the IRS detailed information. But it does a poor job of helping people actually use that information correctly. There’s talk about allowing electronic versions and uploads, which could help. But that raises new questions. Will tax software integrate properly? Will this shift more burden onto software providers and users? Even with those changes, the core issue remains. The form itself is not clear. The totals are not obvious. And the path from the form to the tax return is not intuitive. Until that gets fixed, confusion is going to continue.

Hard to argue with this one. Happy Friday 🍻 What’s your Friday song?

IRS Data Security Gaps and the New Physical Risk to Crypto Holders cryptotaxaudit.com/blog/irs-…

Last year, I talked about Donald Trump's plan to use tariffs as an alternative source of federal revenue. Since then, we've actually seen that policy tested in the real world, and it hasn't been straightforward. Trump imposed sweeping tariffs after returning to office, generating billions of dollars in revenue. But in February 2026, the Supreme Court ruled that the emergency-powers law he relied on did not authorize those tariffs. That decision triggered a massive refund process. By the end of July, around $100 billion in previously collected tariffs had been refunded, including interest. Trump hasn't abandoned tariffs. His administration has continued pursuing them using other legal authorities. And that makes the question I raised originally even more relevant: Can tariffs realistically become a significant alternative to income taxes, or are there legal and economic limits on how far that idea can actually go?

A while ago, I talked about Governor Ron DeSantis proposing to eliminate property taxes for Florida homeowners. At the time, it was an idea. Now Florida voters are actually going to vote on it. But what ended up on the ballot is a little different from simply saying, “Florida is abolishing property taxes.” Amendment 3 will appear on the November 3 ballot, and it needs 60% approval to become part of Florida's Constitution. Here's what it would actually do. For existing Florida residents with a homestead exemption, the exemption from non-school property taxes would increase to $150,000 in 2027 and $250,000 in 2028. After that, it would increase with inflation. And that's an important distinction. This does not eliminate every property tax bill. School district property taxes would still apply. What the amendment does is create a path for counties and municipalities eventually to increase the exemption all the way up to the home's full assessed value for their own property taxes. So we're now getting much closer to the question I raised originally: What happens if homeowners stop paying a large portion of local property taxes? Florida estimates show this isn't a small amount of money. Current projections put the recurring reduction in local property tax revenue at roughly $11.9 billion statewide once the changes are fully reflected. That money currently helps pay for things such as police, fire departments, emergency services, roads, infrastructure and local government operations. Supporters of the amendment argue that homeowners need meaningful relief after years of rising property values and property tax bills. Local governments and some public-safety organizations have raised a different concern: if billions of dollars of property-tax revenue disappear, either spending has to come down or that revenue has to come from somewhere else. And that gets back to the point I made the first time I discussed this. If you eliminate one tax but replace it with higher fees, assessments or some other form of taxation, did you actually reduce the taxpayer's burden? Or did you just move it? Florida has already started tightening the rules around local property taxes. In June, Governor DeSantis signed legislation that generally limits local governments to the rolled-back property tax rate unless they receive a larger vote from their governing boards or, in some cases, voter approval. There's another interesting part of Amendment 3 as well. People who become Florida residents after December 31, 2026 generally would not immediately receive the larger exemption. They would initially receive the existing homestead exemption and would become eligible for the increased exemption beginning in their fifth year, subject to constitutional limitations. And businesses and rental properties aren't completely untouched either. The amendment would reduce the annual cap on increases in the assessed value of non-homestead property from 10% to 5%. One final twist. The original ballot language called this proposal: “Save Our Homes from Excessive Property Taxes.” A Florida judge ruled in August that parts of that ballot language were misleading and inaccurate. The title has now been changed to the considerably less exciting: “Increased Homestead Exemption; Lower Cap on Increases in Non-Homestead Property Assessments.” Not exactly something you're putting on a bumper sticker. But the underlying question is actually much bigger than the title: How much should owning your primary residence continue to cost you in property taxes after you've already paid for the house? And if Florida dramatically reduces those taxes, where should the money for local government come from instead?

If your 1099-DA has left you wondering what you’re actually looking at, you’re not alone. Missing cost basis and different exchange formats can make filing harder than it should be. If you need help preparing your crypto tax return, we can help. cryptotaxaudit.com/

Congressman Warren Davidson, a Republican from Ohio, said we should completely do away with the IRS. In fact, he’s filed a bill in Congress to abolish the 16th Amendment, that’s the amendment that gave the federal government the power to tax income. Davidson claims the IRS is always weaponized by whichever party is in power, Republican or Democrat. And there’s a long history of that. We can go all the way back to Richard Nixon, who had an “enemies list” and used the IRS to target people. Even in more recent years, Donald Trump, before he became president, was subjected to aggressive, punishing IRS audits year after year. Later, his tax returns were released after lawsuits, and some contractors working with the IRS illegally pulled and leaked his tax records online. So, weaponization can come from political parties, and even from individuals within or connected to the IRS. That raises a big question: Is the IRS always going to be used as a political weapon? We’ve seen similar concerns under the Biden administration. Hunter Biden, for example, clearly violated multiple tax filing requirements and failed to pay millions in taxes. Yet the DOJ, under his father’s leadership, refused to prosecute in a timely manner, allowing him to avoid the kind of charges most people would face. And when IRS whistleblowers, specifically Gary Shapley and Joseph Ziegler, came forward about the preferential treatment in that case, they were punished by their management for speaking out. So yes, there’s a legitimate concern that the IRS has been, and continues to be, used for political purposes.