Crypto-literate public accountants are concerned their clients might face Internal Revenue Service (IRS) audits in the U.S. and penalties for underpaying taxes on their crypto holdings, a new survey finds.

Cryptocurrency accounting service provider Blox and tax software developer Sovos conducted a survey of roughly 45 Certified Public Accountants (CPAs) familiar with crypto, finding the majority believe their clients might face penalties for misreporting their tax liabilities from their holdings of assets like bitcoin (BTC). Indeed, many of these respondents believe their clients and other crypto holders likely owe back taxes.

“Crypto clients are still alarmingly unaware of how to handle crypto reporting and tax liabilities,” the report generated by the companies said.

According to the survey, the respondents overwhelmingly believe the U.S. will have the most stringent crackdown on crypto taxes over the next year, followed by China. Zero percent of respondents expect Russia to have the toughest crackdown on crypto taxes.

Known unknowns

Part of the issue for taxpayers might be that these individuals still aren’t sure how to file their taxes. Calculating cost-basis has long been an issue for individuals in the space, and Blox CEO and co-founder Alon Muroch told CoinDesk that many payers might not know if they even have the data they need to properly report their holdings.

“A lot of the software providers out there [didn’t] realize the gap in data, and they simply offered the cost basis calculation without actually verifying the data itself. So, obviously, don’t you put the incomplete data or the wrong data into a [first-in first-out or last-in first-out] calculation, you’ll get different results every time,” Muroch said.

Some of this stems from a record-keeping issue, said Sharon Yip, founder and president of Crypto Tax Advisors. Yip is one of the CPAs who responded to the survey.

“Taxpayers don’t really keep very good records, so when you start transferring costs all over the place, it’s almost impossible to keep track of everything correctly. It’s going to be very difficult to ask exchanges to issue some kind of tax report and and and make it accurate because they just don’t have enough data,” Yip said.

If an individual is conducting transactions exclusively on a single exchange, that might make it easier. Otherwise, exchanges will be unable to provide cost-basis information for other platforms, Yip said.

According to Wendy Walker, a tax withholding and information reporting expert at Sovos, this lack of access to complete data is actually the largest issue facing crypto investors right now from a tax perspective.

“There’s a lot of spreadsheets, there’s a lot of manual transactions going on and that, of course, is not making anyone feel confident about the returns they’re filing,” she said.

This was an issue raised during a summit held by the IRS earlier this month.

Other issues

Adding to the confusion is the fact that taxpayers might file one of several forms, Walker said. She noted the IRS sent warning letters to crypto investors last year, advising them to use a specific form, form 8949, which they would only be able to use if the exchanges on which they conducted transactions sent a 1099-B form.

“The problem is that if they didn’t use a 1099-B, then what’s happening is when they returned, they were receiving a penalty notice from the IRS because the claims that they put on the 8949 couldn’t be substantiated,” Walker said.

It may help to consult with a professional prior to conducting a single trade, Muroch said.