Happy New Year and welcome back to another episode of The Richer Geek Podcast. Today, we are joined by Janna Scott, founder of DeFi Tax, to talk about one of the biggest risks crypto investors face today: inaccurate tax reporting.

Janna explains why most crypto tax software is unreliable, how IRS audits really work, and what happens when reported numbers don't match blockchain data. She shares how her research exposed major gaps in the system and why both individuals and businesses need audit-ready crypto records.

In this episode, we chat about…

• The Software Variance Problem: Janna tested 14 different crypto tax products and found that every single one gave a different outcome, with variances ranging from 30% to 120%.

• IRS Audit Pause: After meeting with Janna and reviewing her research, the IRS admitted their data collection methods were wrong and temporarily stopped crypto audits in 2023.

• The $146 Billion Tax Gap: The IRS has missed out on an estimated $146 billion in tax collection, leading to a new wave of audits with no statute of limitations if they consider the errors to be tax evasion.

• Risk of Data Manipulation: Many popular crypto products allow users to manually change transaction dates and fees, a feature that can immediately disqualify a report from being used in an official IRS audit.

• Exchange Terms of Service: One major exchange responded to Janna's findings by updating its terms of service to block class-action lawsuits and make users solely responsible for data errors.

Key Takeaways:

1. Most crypto tax software is not accurate or audit-safe

2. Blockchain data must be pulled directly to ensure correct reporting

3. The IRS can penalize taxpayers even if they tried to report correctly

4. Crypto audits can go back years with interest and penalties compounding

5. Audit defense matters just as much as tax calculation

6. CPAs and accountants often cannot defend crypto audits without proper tools

7. Preparing now can prevent massive financial damage later

Resources from Janna

LinkedIn | DeFi Tax

Resources from Mike and Nichole

Check out our latest project here: Barcelona Hotel Fund

LinkedIn | Gateway Private Equity Group | Nic's guide