How it works
Letter 6174 is the mildest of the IRS crypto compliance letters. It says the IRS has information that you may have had digital asset transactions, explains the reporting rules, and asks you to review your returns and correct them if needed. There is no deadline and no reply is required. The IRS usually has your name from an exchange, a John Doe summons, or broker reporting such as Form 1099-DA.
Why it matters
It is the earliest and quietest point to fix past reporting. Correcting prior years before an examination opens generally carries lower penalties than waiting, and the work can be done through an attorney so it is covered by privilege.
Example
A taxpayer receives Letter 6174 after several years of trading on an exchange. She reviews her history with counsel, finds one year with unreported sales, and files an amended return before the IRS takes any further step.
Related: Letter 6174-A, Letter 6173, CP2000. Read more: IRS crypto letters and how to react.
Got this notice? Have a tax attorney review it before you reply.
