The IRS is paying a lot more attention to cryptocurrency activity—and if you are involved in crypto trading or investing, there is a good chance you could get a letter soon. These notices are becoming more common as the agency gears up to enforce tax laws on digital assets.
But what do these IRS letters actually mean? Are they all bad? And what should you do if one shows up in your mailbox? Let us break it down together.
Why is the irs sending letters to crypto users?
If you bought, sold, mined, or staked crypto in recent years, the IRS likely knows. Thanks to information-sharing from exchanges and the adoption of new reporting tools like Form 1099-DA, the agency is gathering a lot more data than before.
These letters are part of a push to make sure taxpayers are reporting their cryptocurrency activity correctly. Some letters are simple reminders. Others are warnings that you may owe money—or could even face an audit.
What is IRS letter 6174 and why did i get it?
Letter 6174 is the most common one and honestly, it is not the worst. It is what the IRS calls a “soft notice”—basically a heads-up.
- It tells you that the IRS knows you were involved in crypto transactions between 2018 and 2020.
- It does not accuse you of doing anything wrong.
- You are not required to respond.
Still, if you get this letter, it is a sign that the IRS is watching. It might be smart to double-check your past tax returns and make sure you reported your crypto correctly.
You might have gotten this letter because:
- You used U.S.-based exchanges like Coinbase or Kraken.
- Someone issued a 1099-MISC or 1099-B in your name.
- A third-party system flagged your account for review.
What does IRS letter 6173 mean?
Now this one is more serious. Letter 6173 is not a friendly reminder—it is a warning that the IRS thinks you underreported your cryptocurrency income.
- You must respond by the deadline mentioned in the letter.
- The IRS may ask for documentation to support what you reported.
- If you ignore it, you could face an audit.
This letter usually shows up when the IRS finds a discrepancy between what you reported and what an exchange or platform told them.
Examples that could trigger this:
- Not reporting staking or mining rewards
- Forgetting to include crypto-to-crypto trades
- Missing capital gains from selling or converting coins
If you get this letter, it is a good idea to speak to a tax professional who understands crypto taxes. You might be able to fix the issue before it becomes a bigger problem.
What is a cp2000 notice and should i be worried?
The CP2000 notice is not crypto-specific, but many investors are getting it now because of underreported digital assets.
- It is generated by the IRS’s Automated Underreporter Unit.
- It says the income you reported does not match IRS records.
- It shows exactly how much the IRS believes you owe.
Sometimes, these notices are accurate. Other times, they are wrong because of system errors or missing data. Either way, you should not ignore a CP2000 notice.
Here is what you can do:
- If you agree with the amount, you can fill out the form and pay.
- If you do not, you can respond with corrections or supporting documents.
You usually have 30 days to respond. If you are unsure, a tax attorney or CPA can help you go over the numbers.
Is the IRS really cracking down on crypto now?
Yes. With new reporting forms like 1099-DA coming in, the IRS will have even more details on your crypto activity starting this year.
This effort is happening while some lawmakers are pushing to abolish the IRS altogether and replace it with tariffs. But for now, the agency is very much alive and watching closely.
The IRS wants taxpayers to know: digital assets are not invisible. If you are dealing in crypto, it is time to get serious about taxes.
What should you do if you receive a letter?
Here is what you need to remember:
- Do not panic—but do not ignore the letter either.
- Read the notice carefully to understand what it is asking.
- Check your past returns to confirm whether you reported everything.
- Talk to a tax pro, especially if you are unsure how to respond.
- Act quickly—most letters give you 30 days or less to reply.
Taking action early can help you avoid larger penalties—or worse, an audit.
Related article:
These are the U.S. taxpayers who will have their tax refunds cancelled by the IRS without remedy
