More crypto investors in the U.S. are receiving tax warning letters. In the past 60 days, CoinLedger recorded a 758% rise in users getting notices from the Internal Revenue Service. This rise appears tied to the upcoming 1099-DA rule. It will require crypto brokers to report income and cost basis starting next year.
Many chartered accountancy companies have verified the sudden increase. Specialists say that the IRS may be ready to tighten stricter rules. Warning letters vary in severity. Some users only notify of their tax obligations. Others inform about less reporting or propose additional taxes.
Letter 6174 is less serious. It acts as a reminder that the cryptocurrency transaction is taxable. The IRS implies that some reports are suspected of 6174-A but do not require action. These letters are generic for users with the exchanged plates.
Crypto users face audits for reporting errors
Through the data of the IRS exchange or perhaps through John Doe-like summonses, they may have been identified. Some other serious letters are 6173 and CP2000. These come with a deadline. If you do not respond, your tax situation may lead to a review or fine and may create more problems. The 6173 letter requires you to answer and provide further evidence that you reported your income correctly.
CP2000 indicates a specific amount that is owed due to the reports of the income reports. The IRS wants a response within 30 days. These people feel mixed and nervous when they receive these letters. Most are not paying taxes. Instead, they misunderstood the rules or did not have the right records.
Transfers from one wallet to another can be confusing. Such transfers aren’t taxable but can still result in errors if they aren’t properly tracked. Some users believe that they made the transfer in the past and have now deleted the record, while some users are adamant that they recorded the transaction correctly yet received a letter from the IRS. This often happens due to missing cost basis information.
IRS to get more crypto trade data by 2026
This makes it difficult for the IRS to verify whether the appropriate tax was paid. New regulations will complicate matters. Starting in 2026, Form 1099-DA will provide the IRS with additional information about cryptocurrency transactions. Brokers must disclose details of both sale amounts and costs. This will reduce mistakes and encourage more users to ensure they obey regulations.
People who get Notice can send details of their trading activities and account forms from the exchange. Some people may have missed income in previous years and can declare a revised return for those years. Tax software is enough to handle basic receipts and W-2 forms. However, in complicated financial situations or when there are large investments, it is best to hire professional help.
CoinLedger recently disclosed that the average cryptocurrency investor observed a rise in value of more than $5,000 last year. The most notable assets included HYPE and BTC. Meanwhile, ETH and ADA experienced significant downturns. As regulatory scrutiny increases, users need to monitor every trade to steer clear of complications.
