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What is IRS Letter 3947?


IRS Letter 3947 is a voluntary compliance letter sent to taxpayers who may have underreported income or failed to file a return. It’s a proactive opportunity from the IRS to resolve potential issues before enforcement begins. While it’s not an audit, it signals the IRS has data suggesting you may owe taxes, often from third-party sources like banks, brokers, or crypto exchanges.

IRS Letter 3947 envelope with red stamp marked “Important: IRS Notice Enclosed” representing a voluntary compliance notice from the IRS.

What is IRS Letter 3947?

IRS Letter 3947 envelope with red stamp marked “Important: IRS Notice Enclosed” representing a voluntary compliance notice from the IRS.

IRS Letter 3947 is a voluntary compliance letter sent to taxpayers who may have underreported income or failed to file a return. It’s a proactive opportunity from the IRS to resolve potential issues before enforcement begins. While it’s not an audit, it signals the IRS has data suggesting you may owe taxes, often from third-party sources like banks, brokers, or crypto exchanges.

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Does IRS Letter 3947 relate to cryptocurrency?

Yes! If you traded or sold crypto and didn’t report it correctly, this letter may be your early warning. The IRS has been ramping up its scrutiny of crypto transactions since receiving data from exchanges like Coinbase and Kraken.

What to do next:

Clipboard checklist with Bitcoin magnifying glass icon representing reviewing income and crypto activity.

1: Review all income and crypto activity from the years listed

IRS Form 1040X document icon with pencil, symbolizing amending a tax return.

2: Amend returns if needed, using Form 1040X

Envelope with red exclamation mark icon representing urgent IRS notice requiring response.

3: Do not ignore the letter - failure to respond could lead to an audit

When to Seek Professional Help

CryptoTaxAudit can help you correct past filings, report crypto gains accurately to avoid additional IRS actions, and defend you if the IRS escalates the matter.

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Additional Resources

Voluntary compliance letters