The LTR 6174 is the gentlest of the three IRS crypto letters. It's educational. The IRS is informing you that they know you have or had cryptocurrency transactions and reminding you of your tax reporting obligations. No response is required.
Why You Got This Letter
The IRS has information linking you to cryptocurrency activity. This could come from exchange reporting (1099s from Coinbase, Kraken, etc.), John Doe summonses served on exchanges, blockchain analysis, or information sharing with foreign tax authorities. The LTR 6174 means the IRS has data suggesting you engaged in crypto transactions.
What the Letter Says
The letter explains the basic tax treatment of cryptocurrency: virtual currency is treated as property for tax purposes, dispositions (sales, trades, exchanges) are taxable events, gains and losses must be reported on your tax return, and failure to report can result in penalties, interest, and potential criminal prosecution.
What You Should Do
Even though no response is required, treat this letter as a warning. Review your tax returns for all years in which you had cryptocurrency transactions. If you reported everything correctly, no action is needed. If you didn't report some or all of your crypto transactions, consider filing amended returns to correct the record.
The LTR 6174 is the soft touch. The LTR 6174-A suggests you may need to amend. The LTR 6173 requires a response and means the IRS has specific information about unreported transactions. If you ignore the educational letter and don't correct your returns, the next letter may not be as gentle.
Don't Wait for the Next Letter
Voluntary correction before the IRS contacts you again is always better than responding after enforcement begins. Amended returns filed proactively demonstrate good faith and can reduce or eliminate penalties.
If you have unreported crypto transactions, call us at (813) 229-7100. We handle crypto tax compliance and can help you get current.