How a DeFi-Active Client Recovered $22K in Overpaid Crypto Taxes With the Right CPA
Sam's List Editorial | 2026-06-06
How a DeFi-Active Client Recovered $22K in Overpaid Crypto Taxes With the Right CPA Self-filing with crypto tax software sounds manageable until it isn't. For straightforward exchange trading, the software works. For DeFi, it frequently doesn't — and the errors run in one direction: overpayment. This is the story of one client who came to Crypto Tax Made Easy after three years of self-filing, $400,000 in transaction history across four wallets and six exchanges, and a growing suspicion that something was wrong with their numbers. The suspicion was correct. The overpayment was $22,000 across two tax years — recoverable in full through amended returns filed within the IRS's three-year statute of limitations. The Client and the Situation The client was an active DeFi user — not a casual crypto holder. Over three years, they had interacted with multiple liquidity protocols, staked across several networks, and held positions across four self-custody wallets and six centralized exchanges. On paper, they were doing the right things. They used a reputable crypto tax platform. They reviewed their reports before filing. They paid what the software said they owed. The problem wasn't effort. It was that the software didn't know how to handle liquidity pool tokens — and the client had no way to know what the software was getting wrong. Total transaction volume across the three-year period: approximately $400,000. What the Review Found When Crypto Tax Made Easy conducted the initial review, two separate issues emerged — one structural, one a straightforward miscategorization. The LP Token Basis Problem When you deposit assets into a liquidity pool, you typically receive LP tokens representing your share of the pool. When you exit the position, you return the LP tokens and receive your underlying assets back. The client's crypto tax software treated LP token issuance as a new asset received without cost basis — because the tokens were issued by the protocol rather than purchased on an exchange, the platform had no purchase price to assign. When the client later exited those positions and the LP tokens were redeemed, the software reported the full redemption value as capital gain, as if the basis were zero. It wasn't zero. The client had deposited real assets with real dollar values to receive those LP tokens. The basis was the fair market value of the deposited assets at the time of deposit — which is the correct tax treatment for the exchange of property in a liquidity provision event. Crypto Tax Made Easy reconstructed the transaction history from blockchain data,...
