IRS Letter 6173: Your Questions Answered by Crypto Tax Experts

By Clinton Donnelly, CEO, Founder | CryptoTaxAudit

If you opened your mailbox and found IRS Letter 6173, you’re probably confused and concerned. That reaction is normal.

This letter looks official. It asks detailed questions about your crypto activity from 2016 to 2020. It also asks you to sign a statement under penalty of perjury.

Before you do anything, stop.

Letter 6173 is not a routine IRS notice. How you respond matters, and the wrong response can create serious problems.

At CryptoTaxAudit, we’ve helped many crypto holders deal with this exact letter. This guide covers the most common questions we get and explains what actually puts you at risk.

What is IRS Letter 6173?

IRS Letter 6173 is a formal notice sent to crypto holders asking them to confirm that all cryptocurrency activity from 2016 through 2020 was properly reported.

The letter typically includes a form asking you to sign a declaration, under penalty of perjury, stating that your returns are accurate and complete.

It may reference specific tax years and suggest the IRS has information indicating crypto activity during that period.

Here’s what makes Letter 6173 different.

It is not an audit notice, but it is not a friendly reminder either. It sits in between. The IRS is testing whether you will voluntarily confirm your reporting before deciding whether to escalate the matter.

The broad date range alone is a red flag. The IRS is looking beyond its normal three-year audit window.

Is it safe to sign and return IRS Letter 6173?

No.

Signing Letter 6173 can create serious legal problems.

When you sign that form, you are confirming that your returns are accurate and complete. If the IRS later finds unreported income, they can argue that you knowingly signed a false statement.

Normally, the IRS has three years to audit a return. If income was underreported by more than 25%, they can go back six years. If the IRS claims fraud, there is no time limit.

By signing Letter 6173, you give the IRS a document they can use to support a fraud allegation.

Even if you believe your returns are accurate, signing removes your ability to argue innocent mistakes or good-faith errors. You have already sworn everything is correct.

We’ve seen cases where taxpayers signed similar letters and were later audited over small issues like wallet transfers or staking rewards. The signed declaration made those audits much harder to defend.

What does CryptoTaxAudit recommend if you receive this letter?

Do not ignore it, but absolutely do not sign and return that form without professional guidance.

Start by gathering your records. Exchange statements, wallet histories, and any reports you used for those years. You need to understand what you reported and what the IRS may already see.

Next, speak with a crypto tax professional. Not a general CPA. Letter 6173 requires specific knowledge of crypto reporting gaps, IRS enforcement tactics, and how to respond without creating unnecessary exposure.

At CryptoTaxAudit, we review the returns referenced in the letter, identify potential issues, and help determine the safest response strategy. Sometimes errors need fixing. Other times, the IRS is simply fishing.

If there is unreported income, there are ways to correct it without signing Letter 6173, including amended filings or voluntary disclosure approaches that protect your legal position.

The worst move is responding out of fear. That is exactly what the letter is designed to trigger.

Has the IRS used this strategy before?

Yes.

In 2020, the IRS sent similar warning letters to crypto holders. Different letter numbers, same approach.

Those letters caused widespread panic. Many people filed amended returns unnecessarily or over-reported activity out of fear.

What followed was telling. We have not seen evidence of widespread audits stemming from those letters. The pressure campaign worked without the IRS needing to act.

Letter 6173 follows the same playbook. Vague language. Broad date ranges. No specific allegations.

That does not mean audits never happen. It means the letter itself is not proof that one is coming. Treat it seriously, but don’t assume you are already under investigation.

Looking ahead, the IRS is moving away from broad warning letters and toward systematic reporting. Starting with transactions in 2025, custodial brokers will be required to issue Form 1099-DA beginning in 2026, reporting gross proceeds from digital asset sales and exchanges. Basis reporting will phase in after that for certain assets.

This shift gives the IRS better visibility without relying on voluntary compliance letters. It also explains why the agency is still looking backward at earlier years like 2016–2020, before those reporting systems existed.

Can CryptoTaxAudit defend me if I’m referred to audit?

Yes. Audit defense is what we do.

If your case escalates, you need representation from professionals who understand both crypto transactions and IRS audit procedures. Most tax preparers do not.

We defend clients with complicated histories involving multiple exchanges, wallets, DeFi activity, and NFTs. We know how to document crypto activity in ways the IRS accepts and how to challenge incorrect assumptions.

During an audit, the IRS will request transaction logs, cost basis records, wallet addresses, and explanations of calculations. We help prepare and present that information without volunteering anything that expands the audit.

We also prevent common mistakes that make audits worse, such as relying on arguments that fail or providing unnecessary explanations that invite further scrutiny.

If you’ve received Letter 6173 or a follow-up notice, don’t handle it alone.

Visit CryptoTaxAudit.com before you sign anything.

Final note

IRS Letter 6173 is designed to make you act quickly.

That does not mean you should.

Take the time to understand what the letter is actually asking and what it puts at risk before responding.

Related: IRS Letter 6173 Warning: DO NOT Sign Without Reading This!