IRS Is Sending Crypto Users Tax Letters—Here's What You Need to Know

“This is no longer an isolated handful of cases,” he stressed. Donnelly explained that Letter 6174 notices were voluntary compliance letters, meaning that the IRS has information about your crypto activity and wants you to review whether you have met your tax reporting duties.

Before, Donnelly detected a rise in these letters in the past six weeks, calling it “a vague scare.”

“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 at that time.

But now, he acknowledges that the IRS might be pressuring crypto payers, as it has before, to review past filings and take corrective action. Still, he clarified that receiving one of these letters was not indicative of wrongdoing.

“Threw It Right in the Trash”

First sent to taxpayers in 2019, Letter 6174 notices state 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.”