IRS Crypto Letters Explained: What Letter 6174, 6174-A, 6173, and CP2000 Mean for You

If you've received an IRS crypto letter in 2025 or 2026, you're not alone. The IRS has significantly ramped up the volume of crypto-related correspondence, and the rollout of Form 1099-DA is about to accelerate that trend even further. Starting with the 2025 tax year, brokers are reporting your crypto proceeds directly to the IRS for the first time. That means more data in the system, more automated matching, and more letters going out.

At CountDeFi, we've seen that not all IRS crypto letters are created equal. Some are educational nudges. Others demand a response. And one of them means the IRS has already calculated what it thinks you owe. Understanding which letter you received, and what it actually requires, is the difference between a minor paperwork exercise and a serious tax problem.

Here's what each letter means, how serious it is, and what to do about it.

IRS Crypto Letter 6174: The Educational Reminder

What it means: The IRS knows you've had crypto activity, likely because your name appeared in data obtained through John Doe summonses served on exchanges like Coinbase, Kraken, or Poloniex. Whether you traded Bitcoin, held Ethereum, or swapped altcoins, this letter is informational. It's reminding you that crypto is taxable and that you're expected to report it.

How serious: Low. This is the least aggressive letter in the IRS crypto enforcement toolkit. There's no accusation of wrongdoing and no response is required.

What to do: Treat it as a heads-up. Review your past returns and make sure your crypto activity was reported accurately. If you find errors, consider filing amended returns. If everything checks out, file the letter and move on. But don't ignore it entirely. The IRS now has your name connected to crypto activity, and this letter could be a precursor to something more serious if your reporting doesn't line up with what they have on file.

IRS Crypto Letter 6174-A: The Stronger Nudge

What it means: Similar to the 6174, but with slightly more pointed language. The IRS has reason to believe you may not have reported all of your crypto transactions correctly. It's not an accusation, but it's more than a general reminder.

How serious: Moderate. No response is required, but the letter warns that the IRS may send additional correspondence if issues remain unresolved. Think of it as: "We're watching, and we suggest you get this sorted."

What to do: Review your returns carefully. If you've been underreporting or missing transactions, whether that's Bitcoin sales, Ethereum DeFi activity, or staking rewards from Solana or Cardano, this is your window to correct things before the IRS escalates. Filing amended returns now, while it's still voluntary, is far better than waiting for a letter that requires a response. If your records are incomplete, this is a good time to work with a crypto tax specialist to reconstruct what's missing.

IRS Crypto Letter 6173: The One That Requires a Response

What it means: The IRS believes you have not met your tax filing and reporting requirements for cryptocurrency transactions. This could involve unreported Bitcoin gains, missing Ethereum token swaps, or entire tax years where crypto activity wasn't filed at all. This letter is based on specific information, usually exchange data, that suggests underreporting or nonfiling.

How serious: High. This letter has a deadline, and failure to respond by that date may result in the IRS referring your case for examination. It's the last step before a formal audit.

What to do: Respond by the deadline. Depending on your situation, you'll need to take one of the following actions. If you failed to file returns for years that included crypto activity, file the delinquent returns immediately. If you filed but made errors or omissions, file amended returns using Form 1040-X. If you believe your original filings were correct, send a signed statement of facts explaining your position, along with supporting documentation showing your reported income from crypto transactions.

Send your response to the address or eFax number listed at the top of the letter. Keep copies of everything. Do not ignore this letter. Silence is interpreted as noncompliance, and the next step is an audit.

IRS CP2000 Notice for Crypto: The Proposed Assessment

What it means: The IRS has compared what third parties reported (1099-DAs, 1099-MISC, etc.) against what you filed, found a discrepancy, and calculated what it believes you owe. This is a proposed adjustment, not a final bill, but it requires a response within 30 days.

How serious: Very high. This is the most consequential letter on this list. The IRS isn't asking whether you traded Bitcoin or Ethereum. It's telling you the numbers don't match and presenting a specific tax amount.

What to do: We've written a full guide on how to respond to a CP2000 notice for crypto, but the short version: read the notice carefully, identify exactly what the discrepancy is, gather your records, and respond in writing before the deadline. In our experience, the IRS's proposed amounts are almost always overstated when cost basis is missing, which is the norm under 1099-DA's current reporting rules (proceeds only, no basis for 2025 transactions). Providing accurate basis documentation can reduce or eliminate the proposed assessment entirely.

If your case escalates beyond the CP2000 stage, see our guide on how to survive an IRS crypto audit.

Why IRS Crypto Letters Are Increasing in 2026

Three things are converging. First, exchanges have been responding to John Doe summonses for years, and the IRS is still working through that data. In 2020 alone, the IRS sent over 10,000 warning letters to crypto holders identified through exchange records. That number has grown every year since.

Second, Form 1099-DA has given the IRS structured, machine-readable data on your crypto sales for the first time. Every Bitcoin sale, every Ethereum swap, every Solana trade executed through a reporting broker now generates a data point that feeds into the IRS's matching system. Before 1099-DA, reporting was inconsistent. Some exchanges issued 1099-K or 1099-B forms, others issued nothing. Now the IRS has standardized data it can feed directly into its Automated Underreporter (AUR) system, which flags mismatches automatically.

Third, the digital assets question on Form 1040 creates an easy cross-reference. If you answered "No" but the IRS has a 1099-DA with your name on it, that contradiction alone is enough to generate a letter.

The bottom line: expect more letters, not fewer. And expect them to get more specific as 1099-DA data matures.

IRS Voluntary Disclosure Program for Crypto: What to Know in 2026

If you've been intentionally underreporting crypto income, whether from Bitcoin gains, Ethereum staking, or unreported DeFi profits, and you're worried about criminal exposure, the IRS Voluntary Disclosure Program (VDP) may be an option. The VDP allows taxpayers who have willfully failed to comply with tax laws to come forward, disclose their noncompliance, and resolve their obligations with reduced risk of criminal prosecution. It does not guarantee immunity, but it significantly lowers the risk.

There's an important nuance here: receiving a Letter 6174 or 6174-A does not automatically disqualify you from the VDP. These are informational letters, and depending on your circumstances, you may still be eligible. However, a Letter 6173 significantly complicates eligibility, since the IRS has initiated direct contact about specific noncompliance. And if you've received a CP2000 or are already under examination, the VDP is generally no longer available, because one of the core requirements is that the taxpayer makes first contact, not the IRS.

The IRS opened a 90-day public comment period in December 2025 for proposed updates to the VDP, including a streamlined penalty framework and a new three-month deadline for completing the process after conditional approval. Those changes could take effect later in 2026. If you're considering a voluntary disclosure, timing matters. Consult a tax attorney who specializes in criminal tax matters before taking any action.

What to Do After Receiving an IRS Letter About Crypto

Regardless of which letter you received, the response framework is the same.

Review your records. Pull your transaction history from every exchange and wallet. That includes Bitcoin and Ethereum on Coinbase, altcoins on Kraken, DeFi activity on Uniswap or Aave, and NFT sales on any marketplace. Compare what you reported against what the IRS likely has. If you used multiple platforms or moved crypto between wallets, the IRS may have incomplete or misleading data, particularly if transfers were reported as disposals on 1099-DA.

Correct any errors. If you underreported, file amended returns. If you failed to file, file the delinquent returns. If you reported correctly, gather documentation that proves it.

Don't wait. The further down the enforcement ladder you go (from 6174 to CP2000 to audit), the less flexibility you have and the higher the stakes. Acting early, while you still have options, is always the better move.

Get professional help if you need it. Crypto tax software handles volume, but it doesn't interpret IRS notices, reconcile 1099-DA mismatches, or reconstruct basis from incomplete data. That's what CountDeFi does. We've been defining crypto tax precision since 2017, and we help clients at every stage, from proactive reporting through our Precision 7™ System to responding to IRS letters and CP2000 notices.

If you've received an IRS crypto letter and aren't sure what to do next, start with a free 15-minute call. Book yours now.

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