IRS warning Letters to Crypto Investors: What Thay Mean and What to Do
The internal Revenue Service (IRS) is sending more warning letters to cryptocurrency investors. These letters come in three types: 6173, 6174, and CP2000. They signal a growing focus on crypto tax compliance.
Many investors receive these letters, feeling harassed. The IRS informs them about their crypto transactions and demands proper reporting. This surge may link to the new 1099-DA form, the first crypto-specific tax form.
Some investors find these letters unsettling. The IRS states, “We certainly know you owned crypto between 2018 and 2020.” This implies possible underreporting of crypto income. Tax professionals can help address these issues.
Letter 6174 is the least concerning. It’s an informational notice that can be ignored.However, it signals IRS awareness of your crypto activity.If you used U.S.-based exchanges like Coinbase or Kraken, you might receive this letter. It doesn’t indicate wrongdoing but suggests reviewing past reports.
Letters 6173 and CP2000 are more serious. Letter 6173 warns of potential underreporting and may lead to audits. CP2000 specifies the amount needing reporting. It’s generated by the Automated Underreporter Unit. Sometimes, these notices can be incorrect. If you receive one, consider consulting a tax attorney.
Proactive tax reporting is crucial. Respond within 30 days. the IRS will have more crypto transaction data with the new 109
