New York Cryptocurrency Tax Attorney

Do I Need a Cryptocurrency Tax Attorney?

Digital-asset reporting can become complicated when transactions span multiple exchanges, wallets, tax years, or types of activity. A person may receive an IRS notice after answering the digital-asset question incorrectly, discover that records are incomplete, or receive a Form 1099-DA that does not match the return.

Form 1099-DA reporting is being phased in. Brokers generally report gross proceeds for covered transactions occurring on or after January 1, 2025. Basis reporting applies to certain transactions occurring on or after January 1, 2026. A taxpayer may therefore need to reconcile broker-reported proceeds with separate records for basis and transaction history.

Timothy S. Hart is both a tax attorney and a CPA. He can review the legal and financial aspects of a digital-asset matter, help correct past filings when appropriate, and represent taxpayers in dealings with the IRS or New York State Department of Taxation and Finance.

Schedule a consultation to discuss a cryptocurrency tax problem.

When Cryptocurrency Tax Representation May Help

Legal or tax guidance may be useful when:

• Crypto gains or other digital-asset income were omitted from one or more returns.
• Crypto was exchanged for another digital asset or used to buy goods or services without the resulting disposition being reported.
• A Form 1099-DA does not match the taxpayer’s records or return.
• The IRS issued a notice, proposed adjustment, or audit request involving digital assets.
• Mining, staking, airdrop, or NFT activity was not reported correctly.
• Foreign exchange activity raises separate income-tax, FATCA, or FBAR questions.
• Records are spread across wallets and exchanges, making basis difficult to establish.
• The facts may involve willfulness, a false return, or possible criminal exposure.

How Digital-Asset Transactions Are Taxed

For federal income-tax purposes, digital assets are generally treated as property. A sale, exchange, or other disposition can create a capital gain or loss when the asset is held for investment. Receiving digital assets as payment, mining rewards, staking rewards, or other compensation may create ordinary income.

The digital-asset question on a federal return must be answered based on the taxpayer’s actual transactions. Merely holding a digital asset, purchasing it with U.S. dollars, or moving it between wallets owned by the same taxpayer generally supports a “No” answer, subject to the applicable form instructions. Receiving rewards or disposing of a digital asset generally supports a “Yes” answer and may require additional reporting.

Individuals generally report sales and other capital transactions on Form 8949 and Schedule D. The correct form for ordinary income depends on how the digital asset was received and whether the activity was personal, investment, employment, or business-related.

Common Cryptocurrency Tax Problems

Incomplete wallet and exchange records

Transfers between a taxpayer’s own wallets generally are not taxable, but incomplete records can make it difficult to trace basis. If software cannot connect an asset’s acquisition record to its later disposition, it may calculate an incorrect gain or loss.

Crypto-to-crypto exchanges

Exchanging one digital asset for another can be a taxable disposition even when no U.S. dollars are received. The gain or loss generally depends on the asset’s basis and the value received in the exchange.

Mining and staking rewards

Mining and staking rewards may be ordinary income when the taxpayer gains dominion and control over them. That income generally establishes basis. A later sale, exchange, or other disposition may then create a separate gain or loss based on the difference between the disposition value and basis.

Form 1099-DA differences

For 2025 transactions, many Forms 1099-DA report gross proceeds without basis. Basis reporting is phased in for certain covered transactions beginning in 2026. A form can therefore differ from the taxpayer’s gain-or-loss calculation without necessarily establishing the correct tax result by itself.

NFTs and collectibles

An NFT is not automatically treated as a collectible. Under the IRS’s current interim approach, collectible treatment depends on a look-through analysis of the right or asset associated with the NFT.

Foreign and offshore accounts

Using a foreign platform does not eliminate U.S. income-tax reporting. Separate information-reporting rules are fact-dependent. Under current FinCEN guidance, a foreign account holding only virtual currency is not reportable on the FBAR unless it also holds other reportable assets. FATCA and other reporting requirements require a separate review of the account and assets involved.

New York Cryptocurrency Tax Reporting

New York State has stated that, for personal income-tax purposes, it conforms to the federal treatment of convertible virtual currency as property. That generally means federal property principles flow into the New York return, while the taxpayer’s residency, sourcing, entity type, and transaction facts may affect the state result.

Short-term and long-term classifications come from federal holding-period rules. The New York tax calculation does not use a separate preferential long-term capital-gain rate for individuals. Taxpayers should report the applicable digital-asset income and gains on both federal and New York returns when required.

What Can Happen When Cryptocurrency Is Not Reported?

The consequences depend on the facts, the amount involved, the taxpayer’s filing history, and whether the conduct was negligent or willful. Potential outcomes can include additional tax, interest, civil penalties, an audit, or collection action after assessment and required notices.

Most cryptocurrency reporting issues are handled through civil tax procedures. Criminal investigation is generally reserved for serious cases involving evidence of willful evasion, intentional false statements, or other criminal conduct. Collection actions such as liens, levies, or wage garnishment are not automatic; they arise only after the applicable assessment, notice, and collection procedures.

When to Contact a Cryptocurrency Tax Attorney

Consider getting advice promptly if you received an IRS or New York notice, face a response deadline, have multiple years of missing or inaccurate returns, cannot reconstruct basis, or are concerned that the government may view the conduct as willful. Early review provides more time to gather records, correct errors, and evaluate procedural options.

Why Work With Timothy S. Hart?

Timothy S. Hart is both a tax attorney and a CPA. That combined legal and financial background can help identify the reporting issue, review notices and transaction records, evaluate filing or resolution options, and communicate with tax authorities when representation is appropriate.

Communications with an attorney for the purpose of seeking legal advice may be protected by attorney-client privilege, but privilege is fact-specific and can be waived or subject to exceptions. Tax-return information and ordinary accounting work are not automatically privileged.

What to Expect

1. Review the facts. Gather IRS or state notices, returns, exchange exports, wallet histories, transaction reports, and related financial records.
2. Reconstruct the tax position. Trace transactions, determine basis where possible, and calculate income, gains, and losses.
3. Evaluate options. Depending on the facts, the response may involve an amended or delinquent return, an audit defense, a notice response, a payment arrangement, or another procedural option.
4. Carry out the agreed strategy. Prepare the required filings or submissions and communicate with the relevant tax authority when representation is authorized.

Get Help With Unreported Cryptocurrency

Unreported digital assets, incomplete records, and mismatched information returns can become more difficult to resolve as deadlines pass. Contact Timothy S. Hart Law Group to discuss the facts and available next steps.