IRS Steps Up Crypto Tax Letters, Says Tax Firm CEO

The Internal Revenue Service (IRS), the US tax agency, is sending a growing number of Letter 6174 notices to crypto users, according to Clinton Donnelly, CEO of crypto tax firm Cryptotaxaudit. Donnelly said the letters push taxpayers to review past filings but do not mean they did anything wrong.

• Clinton Donnelly of Cryptotaxaudit described the rise in Letter 6174 notices as “alarming” and said dozens of people have contacted his firm.
• Letter 6174 has been sent to taxpayers since 2019 and asks them to check whether they reported virtual currency correctly.
• Donnelly said Letters 6174 and 6174-A generally do not require a direct reply and advised against rushing to amend returns.

What Cryptotaxaudit says the IRS is doing

Donnelly said on social media that people contacting Cryptotaxaudit include some of the firm’s own clients who received the notices. “This is no longer an isolated handful of cases,” he said.

Cryptotaxaudit prepares crypto tax returns, calculates crypto gains and offers forensic crypto analysis. Donnelly said the volume his company is seeing suggests the IRS is using a letter campaign to pressure crypto taxpayers in the United States to revisit earlier filings and correct them. He said the agency has applied this kind of pressure before.

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Earlier, Donnelly had noted a rise in the letters over a six-week period and called it a vague scare. At that time he said the IRS sends the letters at roughly 10,000 a month to people it knows have made crypto transactions, and that the agency views them as educational.

What Letter 6174 tells taxpayers

Letter 6174 is a voluntary compliance letter. It tells recipients the IRS has information that they hold or held accounts containing virtual currency and may not know the reporting rules. The letter covers both cryptocurrency and other virtual currencies.

The notice also asks people who skipped filing for one or more tax years to submit amended or late returns. It does not point to any specific error in a taxpayer’s return.

What the IRS has done before

The IRS has not publicly confirmed an increase in Letter 6174 mailings. It first sent Letters 6173, 6174 and 6174-A in July 2019, when it said more than 10,000 taxpayers would receive one. Letter 6173 is the strictest of the three and asks for a response by a set date.

The IRS also has far more data on crypto users than it did then. Starting with sales made in 2025, US crypto brokers must report customers’ sales to the IRS on a new form, the 1099-DA, which taxpayers began receiving in early 2026. For crypto bought from 2026 onward, brokers also have to report what customers paid for it.

How recipients are responding

Donnelly urged taxpayers not to amend returns or send information to the IRS before understanding their position, while still reading the letter’s instructions carefully.

Several users on X said they recently received the letter. David Schwartz, chief technology officer emeritus and board member at Ripple, a blockchain payments company, said he got one in the mail and threw it in the trash. He called it “basically just a reminder to follow the law.”

Fake IRS letters aimed at crypto holders are also circulating. The IRS warned on July 30 that fraudsters are mailing counterfeit notices telling people to sign up for a “Digital Asset Compliance Portal” through a QR code. The IRS says it runs no such portal, and the fake site asks for personal details, wallet information and exchange logins.