IRS Crypto Warning Letters 6173 6174 and 6174-A Explained
If you hold or trade cryptocurrency, the IRS has several ways to get your attention. One of them is a letter in the mail. The IRS sends three main types of crypto warning letters: 6174, 6174-A, and 6173. They are not the same, and knowing the difference matters.
Letter 6174 is educational. It says the IRS is aware you may have a cryptocurrency account and reminds you of your reporting obligations. You do not need to respond. No signature is required. It is not a demand; it is a nudge.
Letter 6174-A is a warning. It also requires no response, but it signals more scrutiny. The language is stronger. It tells you the IRS has information that you may have failed to report virtual currency transactions. Ignore it and you risk further attention. Still, no signed response is needed.
Letter 6173 is different. It demands a response, which you must sign and return under penalty of perjury. This is serious. The IRS believes you have unreported income from crypto, and you need to explain why you think you complied, or correct the record. Do not ignore this letter.
The CP2000 notice. This is not a warning letter; it is a proposed adjustment. The IRS has compared what you reported on your tax return with what third parties (exchanges) reported to them. If the numbers do not match, the IRS sends a CP2000 proposing additional tax, plus interest and possibly penalties. You have a deadline to respond - usually 30 days - and missing it makes the proposed changes final.
What to do. Read every letter carefully. Note the deadline. For a CP2000 or a Letter 6173, respond in writing by that date. Do not call. Do not email. Send a signed, dated letter with your explanation. If you owe, pay what you agree with. If you disagree, explain why with supporting documents.
When to involve a tax attorney versus a CPA. A CPA can prepare returns and respond to routine questions, while a tax attorney handles legal risk. If you have received a Letter 6173, or a CP2000 for a large amount, or you fear criminal investigation, talk to a tax attorney first. Anything you tell a CPA is not privileged; a tax attorney can shield your communications. A CPA is fine for simple letters 6174 or 6174-A, where no response is required. For anything that demands a signed statement under penalty of perjury, get an attorney.
One last thing. The IRS has data. It knows about your crypto transactions if the exchange reported them. Do not assume small amounts slip through. Respond on time. Hire the right help.
Not financial advice. babybuilder.xyz publishes market data and general information about digital assets. Crypto assets are volatile and you can lose everything you put in. Nothing here is a recommendation to buy, sell or hold, and we make no price predictions.
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