Don’t panic if you’ve received an IRS crypto letter, most cases can be resolved easily with the right information. The IRS has increased its focus on cryptocurrency reporting, and these letters are part of an expanded effort to remind taxpayers about compliance.
If you’ve received IRS Letter 6173, 6174, or 6174-A, it simply means the IRS has flagged activity linked to your crypto accounts and wants to ensure your tax reporting is accurate. In many cases, these notices are educational rather than enforcement-driven.
This guide explains what each letter means and the exact steps you should take to stay compliant with federal tax rules.
Overview:
- IRS letters flag unreported or mismatched crypto income across exchanges and forms.
- Notices 6173, 6174, 6174-A vary by severity and response urgency.
- Review filings, fix errors, and amend returns before IRS escalation.
- Complete records and accurate Form 8949 reporting reduce audit and penalty risk.
Why Did You Receive a Crypto Letter from the IRS?
The IRS collects crypto user data through multiple channels, including exchange reporting, Know Your Customer (KYC) checks, and John Doe summons issued to major platforms. These tools allow the agency to identify taxpayers who buy, sell, or hold digital assets.
Even if you filed your crypto taxes in previous years, you may still receive a letter. Many of these notices act as early warnings designed to encourage voluntary compliance, while others signal that the IRS has spotted inconsistencies that require review.
Common Triggers for IRS Crypto Letters
- Unreported or underreported crypto income
- Mismatches between your tax return and the data on Form 1099-series
- Missing or incomplete Form 8949 for crypto trades
Whether or not your letter includes a deadline, ignoring it can increase the risk of an audit. Start by reviewing past returns and correcting any errors. You can also refer to our dedicated IRS Crypto Audits guide for a deeper look at how the IRS evaluates digital asset activity.
Understanding the Three IRS Letters: 6173, 6174, and 6174-A
Each of these letters represents a different level of concern from the IRS, ranging from simple education to potential non-compliance.
Letter Type | Severity Level | Response Required | Why You Received It | What You Should Do |
6173 | High | Yes, within 30 days | IRS believes income was unreported or returns missing | Respond in writing, file missing or amended returns |
6174 | Low | No | IRS is reminding you to report crypto correctly | Review past filings and correct errors if needed |
6174-A | Medium | No mandatory deadline | IRS suspects underreporting but lacks full evidence | Review, amend returns, and prepare documentation |
IRS Letter 6173: Mandatory Response Required
Letter 6173 signals the highest level of concern and demands a written response. The IRS sends it when it believes you failed to report crypto income or did not file tax returns for specific years.
What Should You Do?
- Submit missing tax returns immediately if you did not file earlier years
- File an amended return using Form 1040-X if crypto income was omitted
- If you believe your filings are correct, send a statement of facts with documentation, explanation, and your contact details
Failure to respond within 30 days may result in an audit or additional enforcement actions.
IRS Letter 6174: Informational Letter Only
Letter 6174 is an educational notice that does not require a reply. It simply indicates that the IRS knows you hold or trade crypto and wants you to report transactions accurately.
What Should You Do?
- Review your previous tax returns
- Correct any mistakes by filing an amended return
- Ensure gains, losses, and income are properly documented going forward
This letter carries no immediate penalty but signals increased oversight.
IRS Letter 6174-A: Warning of Possible Non-Compliance
Letter 6174-A suggests the IRS believes you may have underreported income but does not yet have enough evidence to escalate. There is no required deadline, but prompt action helps prevent future issues.
What Should You Do?
- Re-check your crypto activity for missing income or incorrect gains
- File amended returns if you spot errors
- Keep supporting documents ready in case the IRS follows up
Addressing discrepancies early reduces the chance of penalties or formal audits.
Note: Before responding to any IRS letter, make sure your crypto tax reports are accurate. KoinX automatically imports transactions from 800+ platforms, calculates gains, and generates audit-ready tax reports, helping you fix errors quickly and confidently. |
What You Should Do After Receiving an IRS Crypto Letter?
Receiving an IRS crypto letter is your prompt to review your digital asset tax filings and ensure everything matches what the IRS has on record.
Follow These Steps: Your 5-Step Action Checklist
- Collect Your Complete Transaction History: Gather data from all exchanges, wallets, and DeFi platforms, including trades, transfers, income, and staking rewards.
- Match Your Records With IRS-Reported Data: Compare your logs with Forms 1099 (including 1099-MISC or 1099-DA). Any mismatch must be resolved before you respond.
- Correct Errors By Filing Amendments: Use Form 1040-X for amendments and attach Form 8949 plus Schedule D to report gains and losses accurately.
- Document Everything Thoroughly: If your filings are already accurate, keep records organised in case the IRS requests supporting documentation later.
- Seek Expert Guidance When Needed: For complex cases,especially involving DeFi, NFTs, or multiple platforms, consult a crypto-specialised tax professional.
For a detailed breakdown of capital gains and income reporting, refer to our internal guide: How To Report Crypto In Taxes?
Note: Do not ignore the letter even if it does not require a response, do not guess numbers or estimate gains because incorrect filings can lead to penalties, and do not file anything without verifying your complete transaction history |
How KoinX Can Help You Stay Compliant?
Crypto tax filing mistakes commonly happen when users manage multiple wallets, interact with DeFi protocols, or trade across many exchanges. These scattered records lead to mismatches, missing cost basis, and inaccurate gain calculations. KoinX solves these problems by bringing everything together in one place.
Organise and Categorise Transactions Automatically
KoinX imports your complete transaction history and automatically classifies each activity based on IRS rules. Staking rewards, trades, swaps, purchases, and sales are all tagged correctly, helping you clearly see how each event affects your taxes.
Track Transactions Across Wallets and Exchanges
KoinX integrates with 800+ exchanges, wallets, and blockchains, allowing you to sync your entire crypto footprint in minutes. This eliminates manual entry and ensures no activity is overlooked when reviewing your tax position.
Automatic Cost Basis & IRS-Ready Reports
KoinX calculates cost basis using accepted IRS methods and tracks gains, losses, and crypto income in real time. You can download IRS-ready tax reports, including Form 8949, with one click, reducing the risk of reporting errors.
Monitor Capital Gains and Income in Real-Time
Your KoinX dashboard gives you a clear view of capital gains, losses, and taxable income at any point in time. This real-time visibility helps you plan ahead and avoid surprises during tax season.
Maintain an Audit-Ready Transaction History
All your crypto transactions are stored in a consolidated, verifiable format. If the IRS asks for supporting details, you can access historical data instantly. This makes audits, amendments, and reconciliations much easier to manage.
Thousands of users trust KoinX for accurate, error-free crypto tax reporting throughout the year. Get started with KoinX before tax season.
Conclusion
IRS letters 6173, 6174, and 6174-A are part of the agency’s broader efforts to improve cryptocurrency tax compliance. Receiving one doesn’t automatically mean you’re in trouble, but it does mean you should take the situation seriously.
Review your previous returns, compare them with your crypto activity, and make corrections where needed. Whether you need to file, amend, or simply confirm that your records are accurate, acting early will help you stay compliant. Tools like KoinX can assist in maintaining accurate records and generating IRS-ready reports, making the process easier and more reliable. So join KoinX today, and make your crypto reporting easier than before.
Frequently Asked Questions
What Happens If I Ignore IRS Letter 6173?
If you ignore IRS Letter 6173, the agency may initiate an audit or enforcement action. The letter includes a 30-day deadline, and failure to respond may result in penalties, further investigation, or legal consequences. It’s important to either file the required returns or submit a detailed explanation with supporting documentation before the deadline.
Can I Respond To IRS Letters Without A Tax Professional?
Yes, you can respond on your own, but it’s recommended to consult a tax professional, especially one familiar with crypto taxation. They can help review your past filings, interpret the letter accurately, and prepare the appropriate response or amendments. This reduces the risk of errors and ensures that your response aligns with IRS expectations.
What If I Reported My Crypto Income But Didn’t Include Form 8949?
If you reported income but omitted Form 8949, the IRS may still issue a letter. Form 8949 is used to report capital gains or losses from crypto sales. In such cases, you may need to file an amended return using Form 1040-X and include the missing details to ensure full compliance with reporting requirements.
Do These Letters Apply To DeFi Or NFT Transactions?
Yes. The IRS expects all taxable crypto activity to be reported, including profits from DeFi platforms and NFT sales. If these were omitted from previous returns, they may trigger IRS attention. Letters 6173 or 6174-A could be issued if there’s suspicion of underreporting related to such digital asset transactions.
Can I Receive Multiple IRS Crypto Letters in Different Years?
Yes, the IRS can issue crypto-related letters across different years if new information becomes available or if your activity changes over time. Each notice reflects the data the agency has for that specific year, so receiving multiple letters does not automatically mean past issues remain unresolved. It simply signals continued monitoring of digital asset activity.