The IRS Crypto Campaign
The IRS has made cryptocurrency tax compliance a priority. Starting in 2019, they sent thousands of letters to taxpayers identified as having crypto transactions. The campaign continues to expand as the IRS receives more data from exchanges and develops better tools for tracing blockchain transactions.
Letter 6174: Education Only
Letter 6174 is the least aggressive of the crypto letters. It is an educational notice informing you of your obligation to report cryptocurrency transactions and pay any tax due. No response is required. The IRS is simply putting you on notice that they know you have crypto activity and expect you to comply voluntarily.
Letter 6174-A: Softer Warning
Letter 6174-A is a step up from 6174. It suggests that you may have failed to report cryptocurrency income and encourages you to review your returns. While it does not demand a specific response, ignoring it is unwise because it signals that the IRS has information about your crypto transactions.
Letter 6173: Response Required
Letter 6173 is the most aggressive of the three. It requires a response. This letter states that the IRS has information indicating you had cryptocurrency transactions and may not have reported them correctly. You must respond by either confirming you reported correctly, filing an amended return, or providing an explanation. Failure to respond can trigger an audit.
The Bigger Picture
These letters are based on data the IRS has already obtained. Major exchanges like Coinbase have been required to provide customer records to the IRS. Starting with the 2025 tax year, exchanges are required to issue Form 1099-DA reporting digital asset transactions, making it even harder to avoid detection.
If you receive any of these letters, the IRS already has information about your crypto activity. The question is whether your tax returns accurately reflect that activity. If they do not, you may want to file amended returns proactively rather than waiting for the IRS to propose changes.
The IRS crypto letters are just the beginning. As reporting requirements expand and blockchain analysis tools improve, unreported crypto income will become increasingly difficult to hide. These letters are your warning to get ahead of the problem.