The only thing out of the ordinary beyond my w2 withholdings was that I traded Bitcoin. I was mostly losing money, and the profits were attributable to Bitcoin appreciating. If I had just held over the same time period, I would have came out ahead.
I felt I had done the responsible thing, proactively figuring out how to pay taxes. I treated the Bitcoin as securities and calculated short term gains / losses. At the time, mainstream tax filers like TurboTax did not support crypto. I ended up paying for a service that generated a file I could import to desktop TurboTax, which by the way kept crashing because the developers seemed to have implemented some kind of very inefficient O(n^2) loop to import this data.
I find it strange that the IRS decided now to reinterpret the 2017 tax year, and the number they think I owe them is two orders of magnitude off from the amount I deposited into / withdrew from the crypto exchange.
I've tried calling the IRS, but keep being transferred around. I live abroad with Google Fi, but the connection is extremely unstable and was just kicked off midway after waiting 2 hours to be routed to a potentially helpful IRS agent. I am looking for tax attorneys and representation services that can help me address this issue.
The first correspondence you received from the IRS is threatening a lien? That seems strange. I would expect they would have issued you an information audit first (basically: hey, can you give us more details on this?).
If we're talking big money, I'd say skip the accountant and go right for a tax attorney. Contact the federal bar.
Edit: I have heard good things about Moskowitz LLP: https://moskowitzllp.com/practice-areas/cryptocurrency-tax-a...
This theory matches up with the numbers that the IRS beliefs I owe them.