Guide to IRS Letters: 6173, 6174, and CP2000

Tynisa (Ty) Gaines
ByTynisa (Ty) Gaines, EAReviewed byZac McClure, MBAUpdated on May 20, 2024 · minute read
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  • If you receive IRS Letter 6173, you must respond and potentially must amend returns and pay back taxes.

  • If you receive IRS Letter 6174 or 6174-A, the IRS thinks you may have underreported your earnings. You don't need to respond, but you may want to contact speaking to your tax adviser.

  • If you receive a CP2000 notice, you must respond to the IRS with more information about your trading history.

What do IRS Letters 6173, 6174, and 6174-A mean?

The purpose of these letters is to inform taxpayers that the IRS has gathered information about their cryptocurrency holdings and trades. They advise recipients to file amended returns and pay taxes owed in light of the IRS' findings.

Letter 6174 from the IRS about cryptocurrency

These letters first started being sent in the summer of 2019, when they were sent to over 10,000 crypto holders. IRS Commissioner Chuck Rettig stated:

Taxpayers should take these letters very seriously. The IRS is expanding efforts involving virtual currency, including increased use of data analytics. This letter is part of a wider campaign to address crypto tax, ranging from taxpayer education to audits and criminal investigations.

You can view examples of the letters on the IRS's press release.

IRS Letter 6173

IRS letter 6173 is the most serious. It requires a response by the date on the letter, whether it’s an amended return to include crypto transactions properly.

IRS Letter 6174 and 6174-A

Letters 6174 and 6174-A do not require a specific response but request action if cryptocurrency wasn’t properly reported. Letter 6174 states, “We have 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."

Similarly, letter 6174-A states, “We have information that you have or had one or more accounts containing virtual currency but may not have properly reported your transactions involving virtual currency.”

The letters also contain instructions on accurately filing your tax return.

CP2000 Notices

The IRS sends a CP2000 if their information about you on file doesn’t match what you reported on your tax return for a given tax year.

The CP2000 requires a response. You can indicate whether you agree with the proposed change in tax amount owed or if you disagree. If you protest the change, you will need to include supporting documentation.

Because the IRS’s information about your crypto may only include the limited data they've received from exchanges, they may have an incomplete picture of crypto transaction history.

For example, the IRS may know that you have staking rewards from your Coinbase 1099, but they may not know your trading history.

You can respond to the CP2000 with your completed crypto tax documents

How TokenTax can help you with your IRS letters

Receiving IRS letters can be stressful. Our team of professional tax experts can help you to guide you through every step of your crypto tax reporting.

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IRS Letters 6173, 6174, and 6174-A regarding cryptocurrency FAQs

Here are answers to frequently asked questions about IRS letters 6173, 6174, and CP2000.

What do IRS Letters 6173, 6174, and 6174-A mean?

These letters from the IRS inform taxpayers about the agency's knowledge of their cryptocurrency holdings and trades. The purpose is to prompt recipients to file amended returns and settle any owed taxes based on the information gathered by the IRS.

How serious is IRS Letter 6173 compared to Letters 6174 and 6174-A?

IRS Letter 6173 is the most serious of the three. It mandates a response by a specified date, typically involving submitting an amended return to report cryptocurrency transactions accurately. On the other hand, Letters 6174 and 6174-A do not necessitate a specific response but recommend corrective action if cryptocurrency was not properly reported.

How does the IRS handle discrepancies in reported cryptocurrency information, and what is a CP2000 Notice?

The IRS issues a CP2000 Notice when the information they have on file about a taxpayer's cryptocurrency activities does not align with what was reported on their tax return. Taxpayers are required to respond to the CP2000, indicating agreement or disagreement with the proposed changes in tax amount owed.

It's crucial to provide supporting documentation if disputing the changes, considering that the IRS may only have limited data from exchanges, leading to an incomplete understanding of crypto transaction history.

What are installment agreements, and how do they relate to IRS Letters 6173, 6174, and 6174-A?

Installment agreements are payment plans arranged with the IRS to settle tax debts over time. If you receive one of these IRS letters indicating a tax obligation related to cryptocurrency, you can request an installment agreement to pay off the owed taxes in manageable monthly installments.

How can I file an amended tax return?

Filing an amended tax return involves submitting Form 1040-X to correct errors or omissions in your original tax return. If you receive an IRS letter and realize that you did not accurately report your cryptocurrency transactions, you should file an amended return to rectify the discrepancies. It's essential to include all necessary supporting documentation to ensure the accuracy of your amended return. When in doubt, consult with a crypto tax professional for guidance.

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Tynisa (Ty) Gaines
Tynisa (Ty) GainesTax Expert at TokenTax
Tynisa (Ty) Gaines, EA has more than 20 years of experience as a tax professional. Ty has published numerous tax articles, two tax e-books, and an academic publication on cryptocurrency for the National Income Tax Workbook.
Zac McClure
Reviewed byZac McClureCo-Founder & CEO at TokenTax
Zac co-founded TokenTax after his career in international finance and accounting at JPMorgan, Imprint Capital and Bain. He has worked in more than half-dozen countries and received his MBA from the UPenn Wharton School.

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