If you put Letter 6174 and Letter 6174-A side by side, they look like twins. Same title, “Reporting Virtual Currency Transactions.” Same schedules explained. Same Philadelphia mailing address. Same bolded line telling you that you do not need to respond.

They are not twins. Two sentences separate them, and those two sentences tell you how the IRS sees your file.

Difference one: “may not have properly reported”

Letter 6174 says the IRS has information that you have or had virtual currency accounts “but may not know the requirements for reporting transactions.” That is an education message aimed at someone the IRS assumes is uninformed.

Letter 6174-A says the IRS has information that you have or had virtual currency accounts “but may not have properly reported your transactions involving virtual currency.” That is a different message. It is not about what you know. It is about what you filed.

The Internal Revenue Manual labels Letter 6174-A the “Virtual Currency Education-Plus” letter and says it “provides instructions on how to report these transactions and advises the taxpayer that the IRS may send other correspondence about potential enforcement activity in the future.” See IRM 21.3.1.8.5.1.

Difference two: the last line

Both letters end with “You do not need to respond to this letter.” Letter 6174-A keeps going: “Note, however, we may send other correspondence about potential enforcement activity in the future.”

That is the IRS telling you, politely, that this letter may not be the last one. It does not promise an audit. It does not promise anything. But when the government volunteers that more correspondence about enforcement may follow, believe it.

What the rest of the letter says

The published template is Letter 6174-A (Rev. 6-2019), Catalog Number 72597M. The body tracks Letter 6174. It explains that virtual currency is property for federal tax purposes under Notice 2014-21, that exchanging one virtual currency for another is a reportable disposition, and that the obligation applies whether your account is in the U.S. or abroad.

It says, in a sentence worth taping to your monitor, that you must report virtual currency transactions on your return “regardless of whether you received a payee statement for the transaction.” Then it walks through three common schedules:

  • Schedule C, for virtual currency received as an independent contractor, measured at fair market value in U.S. dollars when received, which the letter notes is self-employment income subject to self-employment tax.
  • Schedule D, for sales, exchanges and other dispositions, including using crypto to pay for goods or services.
  • Schedule E, for supplemental income such as rents or royalties received in virtual currency.

It also tells you to keep and review your bank, wallet and exchange records so you can determine basis and amounts received. That instruction is the whole game in a crypto case. If you cannot document basis, you cannot prove your gain is smaller than the gross proceeds.

How Letter 6174-A changes your risk picture

A 6174-A tells you the IRS has some reason to believe the reporting was off. Maybe a return showed no crypto at all. Maybe it showed some activity and the IRS had data showing more. The letter does not say, and you should not guess.

What you should do is take the letter as notice, because that is how the IRS will treat it. The IRS fraud handbook lists the 2019 letter campaign, announced in IR-2019-132, among the public notices IRS personnel should weigh when evaluating whether a taxpayer can meet the reasonable cause exception to penalties. See IRM 25.1.2.11.2. A letter in your own mailbox is a more personal version of that same notice.

The same handbook lists, as an indicator of fraud in digital asset cases, “intentional failure to report a substantial portion of digital asset transactions over multiple years despite knowledge of a reporting requirement.” See IRM 25.1.2.11.1. Knowledge is the key word. Before the letter, you may have had a real argument that you did not understand the rules. After the letter, that argument gets weaker every year you leave things uncorrected. I unpack the full list in the IRS fraud indicators for crypto cases.

A practical response plan

The letter does not require a response. The plan below is about protecting yourself, not about satisfying the letter.

  • Inventory. List every exchange, wallet and platform you used, by year. Include the ones you think do not matter. Defunct exchanges count.
  • Reconstruct. Pull transaction histories and rebuild basis. Where records are gone, document how you reconstructed the numbers. The existing guide on missing cost basis records covers techniques.
  • Compare. Put your rebuilt numbers next to each filed return. Note every difference, in both directions. Overstated basis is a problem too; IRC 6501(e)(1)(B)(ii) treats an overstatement of basis as an omission from gross income for the six-year rule.
  • Decide. For each year, decide whether to amend, file late, or leave it. That decision depends on the size of the change, the statute of limitations for that year, and whether anything looks intentional.
  • Correct. If you amend, the letter asks you to write “Letter 6174-A” at the top of the first page of the return and mail the original to the Philadelphia address shown in the letter.

When to stop and get a lawyer first

Most 6174-A recipients can fix their returns with a competent preparer. Some should not file a single page without counsel. Call a lawyer first if any of these are true:

  • The unreported amounts are large relative to what you did report.
  • You answered “No” to the digital asset question on a return when the true answer was “Yes.” See what a wrong answer on that question means.
  • You used tools the IRS associates with concealment, such as mixers or accounts in someone else’s name.
  • You have not filed returns at all for one or more years.
  • You already received a second IRS contact, such as an examination letter or a CP2000.

In those situations, the content of an amended return, and whether a different path like the IRS Voluntary Disclosure Practice is a better fit, is a legal decision. Make it with someone who owes you confidentiality.

Two mistakes I see after a 6174-A

Mistake one: amending only the year you remember. People tend to fix the year with the big sale and leave the swaps from the year before. The letter does not name years, and the IRS data that triggered it may cover more than one. Fix the history, not the headline.

Mistake two: plugging zero basis to be safe. Some preparers, in a hurry, report gross proceeds with no basis on the theory that overpaying is safer than underpaying. It is safer in one narrow sense. It is also expensive, and it is not accurate. If you can reconstruct basis from bank transfers, exchange deposits or on-chain records, do it and document how. The goal is a correct return, not a punitive one.

Accurate is the standard in both directions. The law requires prudence and care, not perfection.

What happens if you do nothing

Possibly nothing. The letter did not start a clock. But “possibly nothing” is a bet, and the IRS has told you that more correspondence about enforcement may follow. If it does, you will be answering an examiner instead of correcting things on your own schedule. I walk through what that escalation looks like in what happens when you ignore an IRS crypto letter.

If the next contact is an examination, you will be asked for documents through an Information Document Request, and your answers will be compared to whatever data the IRS already has. Doing the reconstruction now, while nobody is waiting on it, is cheaper and calmer than doing it on an examiner’s deadline.

The cheapest time to fix a crypto reporting problem is before anyone asks you to. Letter 6174-A is the IRS telling you that time is now.