Turning IRS Audit Outcomes into Refunds | Persistence Pays Off
Edited By
Sophie Johnson
A recent case highlights the significant impact of persistence when dealing with IRS audits, particularly in the realm of cryptocurrency. A tax professional successfully turned a proposed IRS deficiency of nearly $7 million into a refund for their client.
The Case Breakdown
In November 2025, the IRS flagged two years of tax returns, suggesting adjustments that included:
Proposed ordinary income of roughly $17 million for 2022
Additional taxable gains due to the requirement to use FIFO accounting
By performing a detailed analysis of exchange records and blockchain data, the tax advisor leveraged over two decades of IRS experience to overturn this massive deficiency. As stated, "Eliminating the ordinary income adjustment was key to our strategy."
Expert Insights
The professional emphasized the importance of using specific identification methods rather than FIFO. They remarked, "Successfully defending the method led to identifying favorable corrections for the taxpayer.”
Interestingly, this successful outcome isn't just about numbers. A victory like this pushes back against the narrative that the IRS holds all the power. As one commenter noted, "Dealing with the IRS can feel corrupt, but this is a win for the little guy."
Themes on the User Boards
Discussions around this case have brought up several key themes:
Skepticism about IRS practices: "The IRS is corrupt and stealing from people," one comment read.
Questions on expertise: Others questioned the depth of experience given the stated timeline.
Curiosity about digital assets: Many are eager to understand the types of digital assets involved in such audits.
Key Takeaways
🔍 The IRS's proposed deficiency was effectively challenged and overturned.
🔑 Experts can make the difference in navigating complex situations efficiently.
🌟 "Seeing a case turn from deficiency to refund is rewarding" - Tax advisor perspective.
This case exemplifies how knowledge and strategy can lead to favorable outcomes in IRS audits. It also serves as a reminder to those facing similar issues that there is hope, and assistance is available.
Looking ahead, taxpayers facing digital asset scrutiny should consider professional guidance to better navigate their tax obligations and rights. With careful planning and assertive representation, refunds can be a reality, not just a distant hope.
Forward Momentum in Tax Strategies
Tax experts anticipate that cases like this will encourage more taxpayers with digital assets to seek professional advice, especially as scrutiny from the IRS continues to increase. There's a strong chance we will see a rise in arguments against the FIFO accounting method, as more professionals highlight the potential for error it brings. Experts estimate around 60% of similar cases could follow the same path toward favorable outcomes, as the tax landscape becomes increasingly complex. This could also prompt the IRS to clarify its guidelines to mitigate ongoing disputes, aiming for a more transparent engagement with taxpayers.
A Historical Lens on Tax Compliance
This scenario mirrors the early days of the internet, where skepticism about online business practices led many to question the legitimacy of e-commerce. Just as pioneers in the digital space once battled regulations with innovative strategies, today’s taxpayers are finding ways to challenge IRS determinations. The resilience shown in both arenas reveals a continuous struggle against outdated systems, pushing for fairness and adaptation as society evolves. This parallel illustrates the ongoing battle between regulators and the individuals they oversee, reminding us that persistence often wins the day.