I received an IRS Letter 6173, 6174, or 6174-A stating that I may not have properly reported crypto. What do I do?
This month, some crypto holders received a 6174 or 6174-A letter from the IRS. The letter states that the IRS has information on taxpayers holding and exchanging cryptocurrencies, and it recommends to amend any past returns where crypto was not reported.
According to the IRS, these letters have been sent to more than 10,000 crypto holders, with more going out until mailing finishes at the end of August. IRS Commissioner Chuck Rettig has 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."
Per the WSJ, one source of letter recipients come from information Coinbase turned over on customers who exchanged at least $20,000 in volume between 2013 and 2015.
The letter reinforces the IRS’s position on that cryptocurrency is classified as property, and they state that all “sales, exchanges, and other dispositions” must be reported. Such taxable events that need to be reported are:
Selling crypto for fiat
Trading crypto for crypto
Spending crypto on goods and/or services
Receiving crypto as income, i.e. through mining or airdrops, selling goods and/or services for crypto, or receiving crypto as salary.
Need to learn more about how crypto taxation works? Check out our help article on crypto taxable events.
What should I do?
If you've used TokenTax to file all years of your crypto taxes, then you are safe. This letter doesn’t specifically state that the taxpayer owes taxes for cryptocurrency, but rather it advises that crypto should be reported, and prior returns amended if need be. We’ve had some of our clients report that they received this letter even despite reporting all years of their crypto taxes. If you reported your crypto taxes properly, then there’s likely no need to take action.
If you didn’t report your crypto taxes, then it’s a good idea to amend past returns. TokenTax takes your crypto transaction data from any source and generates your tax forms for any year. We have an in house full tax filing service as well, whether you’re looking to file your yearly tax return or amend past years. Any questions? Feel free to ask us on our site’s live chat.
TokenTax does the work so you don’t have to.
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