Filing taxes related to cryptocurrencies in the US can be a very painstaking endeavor. It now appears that the IRS crypto tax audit letter being sent out to users is a lot more invasive than initially assumed. 

It is no secret that the IRS wants to target cryptocurrency holders.

The IRS Goes All-in on Cryptocurrency Usage

To do so, the agency will ask some very tough questions.

Some of those questions will not go over well with the general public.

As it turns out, the IRS wants to know a lot of things most people would never expect.

The copy of the 2017 tax return is perhaps the least annoying part of it all.

Detailed records of virtual currency acquisitions and liquidations are also somewhat easy to come by. 

However, those records must include ATM transactions, cash transactions, and correspondence with counterparties for any of those activities.

Interestingly enough, the IRS also wants to know about airdrop tokens, currencies obtained through hard forks, faucet usage, and tips. 

While this is all-encompassing, it will also create a ton of headaches for American users.

It does not appear that any of the current tax software solutions will be able to check all of these boxes.

It is a very interesting approach by the tax agency, but not necessarily the correct one.