The Internal Revenue Service (IRS) has begun sending warning letters to crypto investors, indicating a crackdown on tax compliance ahead of new regulations. This precedes the introduction of new tax forms in 2026.
Increased IRS Tax Oversight
The IRS is reinforcing its oversight of digital assets to ensure financial transparency in the crypto space. This includes matching reported income with blockchain data, third-party records, and new forms like the 1099-DA.
Types of IRS Warning Letters
Crypto investors are receiving various letters from the IRS, including:
* **Letter 6174**: A reminder to report taxable crypto activity and update previous filings. * **Letter 6173**: A more serious notice requiring a response by a set deadline and filing of missing tax returns. * **Letter CP2000**: Indicates the IRS has already calculated underreported income or tax owed, with 30 days to respond.
What to Expect with 1099-DA Rollout in 2026
Beginning in 2026, all crypto trades conducted in 2025 through digital asset brokers will be reported directly to the IRS using Form 1099-DA. This represents a significant change in how the IRS collects crypto tax data and may trigger widespread audits and possible criminal investigations for non-compliant taxpayers.
The current wave of warning letters from the IRS serves as a critical call to action for investors. It presents a grace period, offering a final opportunity to organize tax filings before stricter penalties are enforced.
