An IRS notice about crypto transactions means the IRS has data they want to discuss with you. If you are dealing with irs letter 6173 cryptocurrency, here is your roadmap.
Crypto Compliance Letters
The IRS has been sending compliance letters to crypto holders since 2019. Letters 6173, 6174, and 6174-A were sent to taxpayers identified through exchange data as potentially having unreported crypto income. Letter 6173 is the most serious, requiring a response under penalties of perjury. Letters 6174 and 6174-A are educational notices but signal that the IRS knows about your crypto activity.
The Automated Underreporter
The CP2000 notice comes from the IRS Automated Underreporter program, which matches third-party data (1099 forms) against your tax return. When exchange-reported proceeds do not appear on your return, the system generates a proposed adjustment. The proposed tax is usually higher than the actual tax owed because the system does not account for cost basis.
Notice of Deficiency
If you disagree with a proposed adjustment and do not reach agreement with the IRS, they may issue a Notice of Deficiency - also called a 90-day letter. This is your ticket to Tax Court. You have 90 days to petition the Tax Court for review. If you miss this deadline, the proposed tax becomes final and the IRS can begin collection.
Response Strategy
Respond to every notice by the deadline. Provide documentation supporting your position. If the proposed adjustment is based on missing cost basis, provide the cost basis records. If you need more time, request an extension. If you cannot resolve the issue administratively, consider Tax Court. A tax attorney can guide you through each stage.
Frequently Asked Questions
What should I do if I receive Letter 6174?
Letter 6174 is an educational notice - less serious than 6173. It suggests you may have unreported crypto income and encourages compliance. While no immediate response is required, you should review your filing for accuracy.
Can I appeal an IRS crypto notice?
Yes. If you disagree with a proposed assessment, you can respond with documentation, request Appeals consideration, or petition Tax Court within 90 days of a notice of deficiency.
What happens if I ignore an IRS crypto notice?
The proposed changes automatically become final. The IRS will assess the additional tax and begin collection, including possible liens, levies, and wage garnishment. Never ignore an IRS notice.
Get Crypto Tax Help Now
Dealing with irs letter 6173 cryptocurrency can feel overwhelming, but there are options. Call the Law Offices of Darrin T. Mish, P.A. at (813) 229-7100 for a free consultation. We have resolved over $100 million in IRS tax debt.