Got an IRS letter about crypto? Here is what each one means
The IRS has sent several waves of letters to people it believes had virtual currency activity. The letters look similar and cause real alarm, but they are not all the same.
- Letter 6174-A: informational only. No response is required. It tells you the IRS has information suggesting you may have virtual currency and reminds you to report it correctly. Keep it with your records.
- Letter 6174: also informational, no response required, but worded slightly more directly than 6174-A. The IRS may follow up later if your future returns still look incomplete.
- Letter 6173: different from the two above. This one does require a response by the date on the letter. The IRS believes you may owe tax on virtual currency and is asking you to respond, which can include filing an amended return if needed. Not responding can lead to further IRS action, including an audit.
- CP2000 notice: not a letter about crypto specifically, it is the IRS's general underreporting notice. It means income reported to the IRS by a third party, which now includes crypto brokers filing Form 1099-DA, does not match what you reported. It is not an audit by itself, but it does require a response.
Source and current guidance: irs.gov, understanding your CP2000 notice. If you are not sure which letter you have, our IRS Letter Decoder tool reads the code on your letter and tells you what it means.
What Form 1099-DA means for your 2025 crypto sales
Starting with 2025 transactions, brokers (including most crypto exchanges) report your digital asset sales to the IRS on Form 1099-DA, the same way a stock broker reports sales on a 1099-B. For many 2025 sales, the form will show what you sold for, called gross proceeds, but may not show what you originally paid for it, called cost basis. If cost basis is missing, the IRS may initially see the full proceeds as gain. We use your own exchange records to report the correct cost basis so you are not taxed on money you never made.
Staking and airdrop income
Crypto you earn, not just crypto you sell, can be taxable the year you receive it:
- Staking rewards are generally taxable as income based on the value when you receive them, separate from any later gain or loss when you sell them.
- Airdropped tokens are generally taxable as income based on their value on the day you gain control of them, even if you did not ask for them or do anything to earn them.
- Mining rewards follow a similar rule: taxable as income when received, based on value at that time.
What happens if I do not respond to an IRS crypto letter?
Letters 6174 and 6174-A do not require a response, so nothing happens immediately if you do not reply, though the IRS may follow up later. Letter 6173 and a CP2000 notice both have a deadline on them, missing it can lead to the IRS assessing tax based only on its own numbers, without your cost basis, which is usually higher than the real gain.