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Spouse might not be so innocent; the IRS will determine how much she knew when it reviews her innocent spouse claim. I wouldn't touch it. His criminal attorney surely has contacts with a good tax attorney for the spouse. Just decline the engagement because this situations calls for an attorney.

Yes, converting one coin to another is a sale of the first coin (Sch D) and a purchase of the second (no reporting), just like selling Apple stock to buy a fruit farm is a sale and a purchase. Both sales and purchases come with fees, just like many brokerage accounts used to impose. Brokers will usually report proceeds net of fees; Coinbase does too, but I'm not sure of other crypto exchanges. I will never embrace crypto! I have been fascinated by it ever since a client started mining years ago. The boss gave that piece of the return to me and told me to figure it out. Now I'm hooked and not only have taken several courses but follow the business news about crypto. I would never buy one though. Even my miner client says he can't wrap his head around non-fungible tokens (like digital "original" artwork, first-edition digital baseball cards, etc), but I don't see the difference between those and cryptocoins. Blockchain technology can establish proof of ownership and definitely has a use (no more title searches!). Digital coin transactions, however, are mostly the traders placing a value on essentially nothing and waiting for another trader to buy the nothing for more than they paid. Perhaps someday they will be useful for purchases of goods and services, but not until they become less volatile. No way will I accept $300 in bitcoin for tax prep knowing it might be worth $250 in the 10 minutes it takes to convert it to cash (of course, it could be worth $350 by then, but I'm not the gambling type). The prolific use of crypto for ransom and money laundering taints it as well.

So, is he a bookkeeping client? S-corp tax client? Personal tax client? What kind of client is he? You might want legal advice from your E&O insurer. Or, even your own lawyer, depending on what your involvement was with this barely a client.

Any chance the spouse can divorce and get a chunk of the the retirement in a QDRO? If spouse is truly innocent, a determination that is still up in the air based on what you have posted so far, then a quick divorce with a property settlement that gives spouse half of the retirement assets might keep it out of the hands of the IRS. Tom Longview, TX

They sent me an email on 10/12 telling me how much they appreciate that I renew early every year, so they are letting me renew early again. I just get it out of the way when they send the email. Tom Longview, TX