The Internal Revenue Service launched a large-scale letter campaign targeting cryptocurrency taxpayers, according to Clinton Donnelly, CEO of Cryptotaxaudit. Donnelly said the volume of Letter 6174 notices has escalated sharply, with dozens of individuals—including his firm's clients—reporting receipt within recent weeks.
Letter 6174 notices are voluntary compliance letters the IRS uses when it has information about a recipient's crypto activity. The notices prompt taxpayers to review their tax reporting duties but do not automatically indicate wrongdoing. Donnelly cautioned that receiving one does not confirm non-compliance.
The IRS first issued these letters in 2019. They state the agency 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."
Six weeks ago, Donnelly observed an uptick in Letter 6174 volume and estimated the IRS was sending roughly 10,000 per month. He initially characterized them as educational outreach. Now he acknowledges the IRS may be pressuring crypto holders to amend past filings and correct any reporting gaps—a tactic the agency has deployed before.
The notices request amended or delinquent returns for one or more tax years but do not specify particular filing errors. Donnelly advised taxpayers not to rush into amending returns or volunteering information to the IRS without first understanding their own position. Letters 6174 and 6174-A do not require a direct response, though recipients should review the instructions included.
Joel Schwartz, CTO Emeritus and board member at Ripple, said he received one of these letters days ago and disregarded it, calling it "basically just a reminder to follow the law." Multiple users on social media have also reported recent receipt.
Taxpayers should verify the authenticity of any IRS correspondence. Fraudsters are mailing counterfeit IRS notices directing crypto holders to fake compliance portals designed to steal financial information.
