IRS Ramps Up Crypto Tax Letters, Sending Roughly 10,000 a Month

The IRS is sending Letter 6174 notices to crypto users at roughly 10,000 a month, and the pace has visibly accelerated over the past six weeks, according to tax attorney Donnelly, who tracks the agency's virtual currency compliance outreach.

Donnelly said the wave is no longer limited. "This is no longer an isolated handful of cases," he stressed. The letters target people the IRS knows have conducted cryptocurrency transactions, based on data the agency already holds.

He described the notices as voluntary compliance letters: the IRS has information about a taxpayer's crypto activity and wants them to review whether they met their tax reporting duties. Six weeks ago, he had assessed the campaign more skeptically, 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 said at that time.

His read has since shifted. He now acknowledges the IRS may be pressuring crypto users, as it has before, to review past filings and take corrective action. Still, he was clear on one point: receiving one of these letters is not indicative of wrongdoing.

What is Letter 6174?

The IRS first sent Letter 6174 notices to taxpayers in 2019. The notice 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 returns or delinquent returns after failing to file them for one or more taxable years. Notably, it does not point to specific inconsistencies in a taxpayer's filings. It's a general prompt to self-review, not an audit notice.

Should recipients respond?

Donnelly's advice is to slow down before acting. "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.

The distinction matters. Letters 6174 and 6174-A differ from other IRS notices in that they generally demand no direct reply. Recipients who file amended returns without understanding their exposure can create problems that didn't exist before the letter arrived.

Who is getting them?

Multiple respondents on X said they received one of the letters recently. One of the highest-profile recipients is Joel Schwartz, CTO Emeritus and member of Ripple's Board of Directors, who said the letter arrived in the mail a few days ago.

He disregarded it. "Threw it right in the trash," Schwartz posted. "It's basically just a reminder to follow the law."

The spread of the letters to long-standing, sophisticated crypto participants suggests the IRS is working from broad transaction data rather than targeting suspected non-filers specifically. For anyone who has traded, sold or otherwise transacted in virtual currency in past taxable years, the practical takeaway is to verify that those years were reported correctly—before the IRS asks a second time.