Cryptocurrency tax accounting firm Crypto Tax Made Easy, in collaboration with Securus Advisors, successfully reduced an anonymous client’s estimated IRS tax exposure from approximately $1.55 million to a settlement of about $148,000—a reduction of over 90%. The case centered on withdrawals from the Poloniex exchange that the IRS initially treated as unreported income, totaling around $4.2 million in assessed unreported income and capital gains.
The IRS had obtained partial exchange data through a John Doe summons, showing funds moving out of Poloniex but lacking the full transaction history. Because Poloniex had ceased supporting U.S. trading, the client could not access their own records to prove the withdrawals were merely transfers between personal wallets. With only one-sided data, the IRS interpreted the outflows as taxable income.
Matt Walrath, founder of Crypto Tax Made Easy, explained: “The IRS has data, but the data does not always explain the full transaction history. When a taxpayer cannot document wallet ownership, exchange deposits, withdrawals, and cost basis, a transfer can be misread as income.” The firm reconstructed the blockchain trail, tracing the client’s net flows and demonstrating that the disputed funds originated from and returned to wallets the taxpayer controlled. Securus Advisors then represented the client before the IRS, presenting evidence that the activity comprised non‑taxable self‑transfers.
The matter settled for roughly $148,000 (including penalties and interest) – about 9.5% of the original $1.55 million exposure. Michael Bergloff, a CPA and partner at Securus Advisors, noted: “Crypto tax defense depends on whether the records can be explained in a way an examiner can follow. Raw exchange data may show funds moving out without showing that the same taxpayer moved funds in first.” The resolution underscores the importance of comprehensive documentation for cryptocurrency transactions and the potential pitfalls of incomplete exchange data during IRS audits.
