IRS Notices

IRS Letter 6174 & 6174-A: What It Means and What to Do (2025)

By Angeline Balsitis, EA · Reviewed by Melissa Ly, Chief Tax Officer · Updated September 11, 2025 · Editorial Standards

Why you got IRS Letter 6174

You got Letter 6174 because the IRS has data linking you to virtual currency — and it wants to remind you that crypto is taxable. Selling, trading, spending, or earning cryptocurrency can all create reportable income or capital gains. The letter is the IRS's polite way of saying, "We know, and we'd like you to double-check your math."

Where did that data come from? Crypto exchanges report customer activity to the IRS, and the agency has used court orders known as "John Doe summonses" to pull records from major platforms. Many exchanges now also send Forms 1099 for certain activity. So when your name turns up in those files, the automated system can mail you one of three crypto letters. The IRS explains the broader rules on its digital assets reporting page.

Letter 6174 vs. 6174-A vs. 6173 — which one did you get?

The IRS sends three different crypto letters, and the difference matters a lot:

• Letter 6174 — the lightest version. The IRS isn't sure you have a problem; it's mostly educational. No response required.
• Letter 6174-A — slightly stronger. The IRS believes you may not have reported your crypto correctly and warns it may follow up later. Still no response required.
• Letter 6173 — the serious one. This letter does require a signed, dated response by the date printed on it. Ignoring a 6173 can trigger an examination.

So if you're holding a 6174 or 6174-A, take a breath. Nothing has been assessed, nothing is owed yet, and no enforcement clock is ticking. But "no deadline" is not the same as "no action."

What happens if you ignore it

Letter 6174 itself carries no penalty for non-response. The risk is what comes next if your returns really are missing crypto income. The IRS already has the data — so if it follows up, the path usually looks like this:

1. Letter 6174 / 6174-A — educational nudge. You are here. No tax assessed.
2. CP2000 — the automated underreporter notice. The IRS compares its 1099 and exchange data to your return and proposes additional tax, plus interest and possibly a 20% accuracy penalty.
3. Examination (audit) — if the numbers are large or unclear, the case can move to a full review of your crypto activity.
4. Assessment & collection — once tax is assessed, the normal collection notices (CP14, CP501, CP503, CP504) begin, and the balance grows at roughly 0.5% per month in failure-to-pay penalties plus interest.

The whole point of the 6174 is to let you fix the problem cheaply, before it becomes a proposed assessment with penalties attached. Acting now is almost always cheaper than waiting for a CP2000 notice.

First: make sure your crypto really was reported

Before you do anything, find out whether you actually have a gap. Spend an hour pulling the facts together:

• Pull your exchange records. Download the full transaction history and any year-end tax forms (1099-B, 1099-MISC, 1099-K, or the newer 1099-DA) from every platform and wallet you used.
• Check what you reported. Did your returns include a Schedule D / Form 8949 for crypto sales and trades? Did you answer the digital-asset question on the front of Form 1040? Trading one coin for another counts — even if you never cashed out to dollars.
• Compare year by year. Letter 6174 may cover several tax years. Look at each one separately; you may be fine for some and short on others.
• Screen for scams. A genuine Letter 6174 comes by mail and never demands payment in crypto, gift cards, or wire transfers. If something asks for money, it isn't this letter. Here's how to tell if an IRS letter is real.

Your options if you under-reported crypto

If you find a gap, you have clear ways to correct it — and which one fits depends on how much was missed and how it happened:

• Amend the return. File Form 1040-X for each affected year to add the missing gains or income. This is the most common fix and shows the IRS good faith.
• File a missing return. If you never filed for a year crypto activity occurred, file it now. A surprise 1099 from an exchange often surfaces income people didn't realize they owed tax on.
• Pay or set up a plan. If amending creates a balance you can't pay all at once, an installment agreement or other arrangement keeps you in good standing while you pay it down.
• Penalty relief. If this is your first slip in years, first-time penalty abatement may remove a failure-to-file or failure-to-pay penalty. Reasonable-cause relief may apply in other situations.

One honest caution: be wary of anyone promising to make a crypto problem disappear, or to settle a debt for pennies on the dollar before they've reviewed a single transaction. That's a sales pitch, not a strategy. Real relief depends on your actual numbers.

How to respond, step by step

1. Confirm which letter you have — 6174, 6174-A, or 6173. Only the 6173 requires a written reply by its deadline.
2. Gather every exchange and wallet record for the years involved, plus copies of the returns you already filed.
3. Reconcile the numbers. Calculate gains and income per year and compare them to what you reported.
4. Fix any gaps. Amend or file the affected years, then arrange to pay any resulting balance.
5. Keep proof. Save the letter, your calculations, and confirmation of anything you file — crypto cost-basis questions can resurface later.
6. Get a professional review if it's complex — multiple years, big balances, DeFi, staking, or missing cost basis. The order you fix things in (returns first, then penalties, then the balance) changes what you ultimately pay.

IRS Letter 6174 questions, answered

This guide is general information, not tax or legal advice for your specific situation. Eligibility for IRS programs depends on individual facts and circumstances; no outcome is guaranteed.

Related: Why did I get a letter from the IRS? · Understanding the CP2000 notice · or browse all guides.