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Tax office external audit and review of tax circumstances: what does it mean?
In Baden-Württemberg, tax offices, in particular Ulm, Stuttgart and Singen, are currently sending an increasing number of letters to taxpayers who have invested in cryptocurrencies. These letters frequently carry subject lines such as „Review of your tax circumstances“ or „Examination within the scope of tax supervision“. The background is that the authorities have received extensive transaction data from crypto exchanges and are now checking whether the resulting gains were correctly declared in tax returns. The initial focus is on cases with high trading volumes (for example more than 50,000 EUR turnover per year between 2015 and 2017), but smaller investors can also be affected. This development clearly shows that crypto transactions have come into the sights of tax investigators, and the tax office is now demanding an account of any undeclared crypto gains.
Content of the letters: request to submit documents, and warnings
The current letters from the tax offices appear factual and unspecific at first glance, but they carry weight. The tax office letter states that possibly not all income, for example from crypto transactions, was declared in the tax return. Specifically, the tax office requests the recipient to submit documents or to provide missing information subsequently. The person concerned is thus expected to set out their income from crypto transactions for certain periods and to supply evidence of transactions. Usually no detailed data is specified; as a rule the letter contains no concrete transaction lists but leaves it to the taxpayer to disclose all relevant gains.
In doing so the authorities set a short deadline for the response. Missing or understated income is to be declared subsequently within this deadline. Between the lines, and sometimes expressly, reference is made to threatened consequences: anyone who does not comply with this request risks tax criminal proceedings for tax evasion. The letters are often described as a „golden bridge“ because they offer a final opportunity to correct omissions in order to escape prosecution. It is important to note that in most cases at the time of the letter no official tax criminal proceedings have yet been initiated, so one is at a preliminary stage. In serious cases, however (for example with very high amounts), the authorities would act directly via the fines and criminal matters unit and open proceedings. The letter from the tax office should therefore be understood as a serious warning and acted upon accordingly.
Legal bases: Fiscal Code Sections 208, 93, 97, 193, 195, 203
The tax offices base these crypto audits on various provisions of the Fiscal Code (AO). Here is a brief overview of the most important legal bases:
In summary, these legal bases give the tax offices far-reaching powers to obtain information and carry out audits in order to uncover tax evasion involving cryptocurrencies. As the recipient of such a letter you will generally find references to these provisions in a footnote or in the text of the letter in order to substantiate the official basis of the demands.
„Review of your tax circumstances“ versus a tax external audit
It is important to classify the character of these audits correctly. A letter with the subject „Review of your tax circumstances“ in connection with cryptocurrencies differs from a routine tax external audit (business audit):
In short: the tax office letter on crypto audits is a warning and clarification instrument. It is less formal than an external audit, but by no means non-binding. If it is ignored, the „review of your circumstances“ can quickly become a formal external audit or directly tax criminal proceedings. Those affected should know the differences but take both scenarios equally seriously.
Consequences of no reaction or an incorrect reaction
Anyone who receives such a letter is under pressure to act. Not reacting or providing incorrect information can have serious consequences. The tax administration has already made clear what can happen if the request to cooperate is ignored:
An incorrect or incomplete reaction is also dangerous. Anyone who, for example, answers only the points expressly mentioned in the letter but continues to conceal further crypto gains is sitting on a time bomb. Should the tax office later uncover these as well (for example through further data or enquiries), the penalty will be considerably harsher. A partial subsequent declaration that later turns out to be incomplete can be assessed as attempted deception, and then the benefit of a voluntary correction is forfeited. Likewise, deliberately incorrect information leads to an increase in the penalty, since this counts as active deception.
In particularly serious cases the authorities can take even more drastic measures. Where substantial evasion is suspected, tax investigators may for example carry out house searches or seize evidence. In the worst-case scenario the range of consequences extends from the initiation of criminal proceedings through house searches to compulsory enforcement. At that point at the latest the case has moved fully onto the criminal track.
Conclusion: Ignoring or improperly answering such an audit letter is not a solution; it only makes the situation worse. The authorities already hold a great deal of information. Anyone who nevertheless waits or lays false trails risks fines, high back taxes plus interest and, in serious cases, custodial sentences of up to 10 years (in particularly serious cases of evasion). Everyone who receives mail from the tax office about cryptocurrencies should be aware of the seriousness of these consequences.
Recommended action: obtain professional support
Given the complex situation and the considerable risks, the first rule is: do not act alone. If you have received a letter from the tax office regarding cryptocurrencies, you should obtain expert advice immediately. Do not try to handle the problem single-handedly or even to sit it out by doing nothing. Instead it is advisable to consult an experienced tax advisor (ideally with crypto expertise) or a lawyer specialising in tax law. They can assess your situation objectively and help you initiate the right steps.
A professional will first check the authenticity of the letter (there have been isolated attempts at fraud with fake letters, so a watchful eye is important here). If the letter is genuine, the tax advisor can work out a strategy together with you: what exactly is the tax office demanding? Which documents have to be compiled? Are there already indications of criminal proceedings, or is a subsequent declaration leading to exemption from punishment still possible? How can the response be prepared completely and within the deadline?
With crypto transactions in particular, documentation is often extensive. An expert knows the tax pitfalls and knows what the authority attaches particular importance to. They can help you prepare and correctly evaluate transaction histories from exchanges or wallets (for example calculating holding periods, determining gains and so on). In addition the tax advisor can serve as a buffer towards the tax office: communication then runs through the firm, which saves you time and nerves and ensures that nothing ill-considered is said that could harm you.
My recommendation: take the tax office letter seriously and contact an expert as quickly as possible. Do not hesitate to obtain professional help; the cost of it bears no relation to the possible financial and criminal damage threatened by an incorrect approach. A skilled tax advisor can often find an amicable solution with the tax office before the situation escalates.
Which mistakes should you avoid?
🚫 Not reacting: If you ignore the letter, you risk an estimate by the tax office, usually to the taxpayer’s disadvantage.
🚫 Providing incorrect information: If you state incomplete or incorrect figures, this can be assessed as attempted tax evasion.
🚫 Taking the matter lightly: Even smaller amounts can lead to high back payments and penalties.
Conclusion: act now and secure your crypto taxes!
The tax office is increasing the pressure on crypto investors. Anyone affected should not wait but act proactively. Have you received mail from the tax office about cryptocurrencies? Do you feel unsure how to react? We are at your side. As experienced advisors in crypto tax matters we support you in compiling the required documents, submitting them to the tax office on time and safeguarding your rights in the process. Obtain individual advice before you reply; that way you avoid mistakes that could later prove expensive. Contact us today for a no-obligation consultation.
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Frequently Asked Questions on tax office audits
Why is the tax office specifically auditing crypto investors?
Because the data situation keeps improving: collective information requests to exchanges, control notifications and, from 2026, the automatic exchange of information supply the authorities with transaction data. Conspicuous differences between reported data and declared income lead to enquiries and even to an external audit.
Which documents must I submit in an audit?
The complete transaction history with acquisition and disposal dates, prices and fees, plus evidence relating to wallets and exchange accounts. Retention obligations follow from Section 147 AO. Anyone without their own documentation risks estimates to their disadvantage.
How should I react to an audit letter?
Stay calm, note the deadlines and do not submit anything prematurely or incompletely. First prepare your own data, then reply, ideally through a tax representative. Incorrect or contradictory information in the first response causes the greatest follow-up problems.
Can an audit turn into criminal proceedings?
Yes. If the auditor finds indications of intentionally understated tax, the criminal and fines unit is brought in. From that moment a voluntary disclosure leading to exemption from punishment is regularly blocked for the years concerned. That is why timing matters: act before the audit begins.
