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Crypto Gains and Tax Pains: Why IRS Tax Relief Programs Matter


The cryptocurrency world is exhilarating and offers endless opportunities for significant financial gains. However, these gains come with substantial tax liabilities that can catch many investors off guard. The intricate web of cryptocurrency taxation can be daunting, and failing to comply with IRS regulations can result in severe penalties. Understanding and utilizing IRS tax relief programs can be a game-changer for those facing hefty tax bills. Schedule a free consultation for tax relief to explore how these programs can mitigate your tax burdens and keep your crypto investments profitable.

The Complexities of Cryptocurrency Taxation

However, buying and selling cryptocurrency involves more than just the face value. Cryptocurrencies, being a new form of asset, have their own set of taxation laws that are quite complex in comparison to a normal tangible asset. The IRS has categorized cryptocurrencies as property, and as such, any form of exchange—be it sale or trade—or even the use of virtual currencies to buy other assets—is liable to be taxed.

For instance, if you invested in Bitcoin and its price rose from $5,000 to $15,000 and decided to sell, you would have a capital gain of $10,000, which is taxable. The specific percentage that is taxed depends on the holding period. If you have been holding Bitcoin for over a year, you will be charged with long-term capital gains tax rates that are considered lower than the others. But if you sold it within a year of its purchase, you will be subjected to short-term capital gains taxes, often close to your income tax rates.

Moreover, the IRS demands U.S. dollars to indicate all crypto trades, which requires careful price tracking to determine profits and losses. This complexity can become cumbersome, especially when an active trader enters and exits various positions in different trading platforms.

Why IRS Tax Relief Programs are Needed

Considering cryptocurrencies’ intricate and potentially costly nature, the opportunity to take advantage of IRS tax relief programs can be a significant asset. These programs are intended to assist taxpayers in debt with the IRS with partial payment or payment plans that allow for partial payment of the tax owed, including high-tax obligations that may stem from crypto profits.

The Offer in Compromise (OIC) is one of the most popular tax relief programs for which any taxpayer can apply. This program enables the taxpayer to pay the amount in his or her tax account less than the amount owed. To qualify for this, one has to prove that paying the total tax owed would be detrimental to their financial position. The IRS considers your income level, expenses, the equity in your assets, and the amount of wealth you have.


Another vital program includes an installment Agreement, whereby taxpayers can resolve to pay their tax liabilities in installments. Installment agreements offer varying payment options for tax debts, including short-term and long-term payment plans based on the amount owed and the taxpayer’s ability to pay the amount.

The Penalty Abatement program can help reduce or eradicate extra costs related to penalties and interest on unpaid tax debt. Penalty abatement is usually allowed when a taxpayer has proper justification for not meeting the tax requirements, such as severe sickness, calamities, or any other circumstance beyond control.

Besides, the Currently Not Collectible (CNC) status can be provided to any taxpayer if it is impossible to collect the tax amount without causing him serious economic problems. As such, the IRS stops collection activities for a while and gives taxpayers time to become spiritually and economically healthy.

How to Leverage IRS Tax Relief Programs for Crypto Gains

The programs the IRS offers in the tax relief sector can be somewhat puzzling, but the gains that come with it are rather rewarding.


Here’s a step-by-step approach to leveraging these programs for your crypto tax liabilities:

  1. Evaluate Your Financial Situation: To create your financial plan, start by evaluating your financial situation comprehensively. Determine the total amount of tax you are required to pay, together with any additional penalties and interest. Assess your capacity to pay taxes and discover any conditions that may help you apply for Tax Relief.
  2. Gather Documentation: Gather all your financial records, such as records of the transactions you made in cryptocurrencies, your income statement, expenses, and any other documentation that can support your financial suffering.
  3. Consult a Tax Professional: Due to the complexity of cryptocurrency taxation and the performance of IRS relief programs, it is highly recommended that you seek the help of a professional tax consultant familiar with these two spheres. They can advise you on how to proceed and can help you fill out the application forms.
  4. Apply for Relief: Apply for the correct type of IRS tax relief program you want. Expect questions and possible requests for documents that prove your solvency. It is, therefore, advisable to consult your tax professional when filling out the application to make sure you get all the essential information.
  5. Negotiate and Comply: In applying for relief, you might be required to bargain the terms of your relief agreement. After an agreement has been made, it’s crucial to fulfill all the stipulations signed, including any payments that may be expected.


The emergence and popularity of cryptocurrencies offered great opportunities for investors; however, they introduced novel problems associated with taxation. When the IRS categorizes cryptocurrencies as property, this creates additional levels of complication for taxation, which makes it relatively easy for investors to owe large amounts of taxes. These tax obligations can be overwhelming; thus, IRS tax relief programs are designed to help people find ways to deal with these burdens in some manner and effectively.

In sum, investors in digital currencies must grasp these programs to drink less from the tax cup and keep profiting. If you find yourself losing to taxes from your crypto investments, do not hesitate to contact us for a free consultation on how to get the necessary relief regarding taxes and what options are available.