The Internal Revenue Service is sending a large wave of Letter 6174 notices to cryptocurrency taxpayers, according to Clinton Donnelly, CEO of Cryptotaxaudit, a firm that provides crypto tax returns, gain calculations, and forensic analysis. Donnelly described the volume as “alarming” and said dozens of people, including the firm’s own clients, have contacted the company after receiving the notices.
What Letter 6174 Says
First sent to taxpayers in 2019, Letter 6174 states that the IRS has “information that you have or had one or more accounts containing virtual currency but may not know the requirements for reporting transactions involving virtual currency, which include cryptocurrency and non-crypto virtual currencies.” The letter calls for filing amended or delinquent returns for one or more taxable years but does not point to specific inconsistencies.
Donnelly explained that Letter 6174 notices are voluntary compliance letters, meaning the IRS has information about a taxpayer’s crypto activity and wants them to review whether they have met their tax reporting duties. He clarified that receiving one of these letters is not indicative of wrongdoing.
Volume and Tone
Donnelly said he detected a rise in these letters over the past six weeks, calling it “a vague scare” at the time. “They send these letters out at roughly the rate of 10,000 a month, and they send them to people that they know have had cryptocurrency transactions. And it’s simply educational. That’s how the IRS looks at it. It’s an educational letter,” he assessed then. Now, he acknowledges the IRS might be pressuring crypto payers, as it has before, to review past filings and take corrective action.
Advice for Recipients
Donnelly advised taxpayers not to rush into amending returns or sending information to the IRS without first understanding their position. “DO NOT rush into amending tax returns or sending information to the IRS without understanding your position first. Letters 6174 and 6174-A generally do not require a direct response, but you should review the instructions carefully,” he concluded.
Multiple respondents on X said they had recently received one of the letters. Joel Schwartz, CTO Emeritus and member of Ripple’s Board of Directors, said he got one in the mail a few days ago but disregarded it. “Threw it right in the trash,” Schwartz posted. “It’s basically just a reminder to follow the law.”
