Thousands of cryptocurrency holders in the United States are discovering that the American tax authority has been quietly monitoring their activities.
Over the past two months, there’s been a 758% increase in reports of tax warning letters from the Internal Revenue Service (IRS) related to digital assets, according to data from CoinLedger.
This phenomenon is affecting even those investors who believed they had complied with all current tax regulations. Crypto tax advisory firms like Taxing Cryptocurrency confirm this growing trend.
Types of letters and their legal implications
The IRS communications aren’t all the same — they vary in severity and consequences. The most common is Letter 6174, considered a “soft notice” that doesn’t directly accuse the taxpayer of any tax violations. Then there’s Letter 6174-A, which implies potential issues in the taxpayer’s return.
Things get more serious with Letter 6173, which requires a mandatory response from the taxpayer. The highest level of warning is the CP2000 notice, where the IRS has already calculated the amount owed and gives the taxpayer just 30 days to contest the assessment — otherwise, collection procedures are triggered automatically.
According to CoinLedger, the most concerning aspect of this campaign is that many letter recipients are everyday retail investors who acted in good faith. Ben Yoder, Customer Success Manager at CoinLedger, told Cryptopolitan:
“These aren’t tax evaders, they’re everyday investors who held Bitcoin or Ethereum for years and thought they did everything right.”
The IRS has gathered data from exchanges such as Coinbase and Poloniex, using this information to retroactively verify tax filings. Reportedly, the main issue arises when investors transfer digital assets between different wallets: for example, if someone buys bitcoin on one platform, moves it to a cold wallet, and later sells it on another exchange, the second exchange may report a zero cost basis, making the entire sale appear as pure profit, CoinLedger warns.
Starting in 2026, crypto exchanges will be required to file the new Form 1099-DA both to users and directly to the IRS, documenting capital gains and losses. If taxpayers fail to report amounts matching those listed on the 1099-DA, they’ll almost certainly receive a CP2000 notice.
David Kemmerer, CEO of CoinLedger, commented:
“The IRS has more visibility into crypto than ever before, but without accurate cost basis data, even compliant investors can get mistakenly flagged.”
