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What is IRS Letter 6198?

IRS Letter 6198 addresses disallowed deductions from passive activity losses, often related to rental real estate or investments in partnerships. These losses are limited under IRC §469 unless you materially participate or dispose of the activity. The letter typically means the IRS is adjusting your return to remove losses you weren’t allowed to take.

White envelope stamped “IRS Letter 6198 – Important IRS Notice Enclosed,” representing IRS compliance notice for crypto tax reporting.

What is IRS Letter 6198?

White envelope stamped “IRS Letter 6198 – Important IRS Notice Enclosed,” representing IRS compliance notice for crypto tax reporting.

IRS Letter 6198 addresses disallowed deductions from passive activity losses, often related to rental real estate or investments in partnerships. These losses are limited under IRC §469 unless you materially participate or dispose of the activity. The letter typically means the IRS is adjusting your return to remove losses you weren’t allowed to take.

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Are Mining, Staking, and DAO Earnings Considered Passive?

If you invested in crypto mining farms, staking pools, or DAOs as a passive participant, these could be impacted by passive activity loss rules.

What to do next:

Minimalist vector icon of an IRS appeal folder with documents and a teal clock, symbolizing appeal deadlines and required documentation.

1: Review IRS rules on material participation

Minimalist vector icon of an IRS tax form with a teal pencil and check marks, symbolizing amending a return for disallowed losses.

2: Amend your return if you claimed disallowed losses

Minimalist vector icon of an IRS appeal folder with documents and a teal clock, symbolizing appeal deadlines and required documentation.

3: If you disagree, gather documentation and appeal within the timeframe

When to Seek Professional Help

CryptoTaxAudit helps investors navigate passive activity rules when investing in crypto-related ventures and can defend your position if challenged by the IRS.

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Additional Resources

Voluntary compliance letters
About IRS Letter 6198
IRS Form 6198 (PDF)
IRS Form 6198 Instructions