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Elena R
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- Jun 26, 2025 11:56 UTC
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Crypto Tax Audits Incoming? IRS Letters Signal Start of 1099-DA Enforcement
IRS sends warning letters to crypto investors ahead of 1099-DA rollout, urging accurate tax filings to avoid penalties.
Starting 2026, all brokered crypto trades from 2025 will be reported to IRS via Form 1099-DA, raising audit and compliance risks.
The Internal Revenue Service (IRS) has issued a new wave of warning letters to crypto investors, signaling a crackdown ahead of the upcoming 1099-DA regulation, which is set to take effect in 2026. This aggressive move has sparked anxiety across the crypto community, especially as many investors face confusion over reporting requirements.
Crypto Tax Anxiety Surges After IRS Letters
According to David Kemmerer, Co-founder and CEO of CoinLedger, crypto investors across the U.S. have received various types of IRS letters urging them to review and update their crypto tax filings. If left unaddressed, these warnings could lead to serious investigations.
“We’re seeing a wave of confusion and fear among everyday crypto investors, many of whom made their best effort to report taxes accurately,” Kemmerer explained.
Why Is the IRS Sending Crypto Warning Letters?
The IRS is stepping up its visibility into digital asset transactions as the U.S. continues its push for financial transparency in the crypto space. This includes matching reported income with blockchain data, third-party records, and new forms like the 1099-DA.
Kemmerer emphasized the urgency of proactive compliance:
“With Form 1099-DA on the horizon, this kind of enforcement is only going to accelerate. The IRS has more visibility into crypto than ever before, but without accurate cost basis data, even compliant investors can get mistakenly flagged.”
Types of IRS Warning Letters Sent to Crypto Investors
Here are the key letters crypto investors are receiving:
- Letter 6174: A reminder that investors must report taxable crypto activity and update previous filings.
- Letter 6173: A more serious notice demanding a response by a set deadline and requiring investors to file missing tax returns involving crypto.
- Letter CP2000: Indicates that the IRS has already calculated underreported income or tax owed. Investors are given 30 days to respond.
Form 1099-DA: What’s Coming in 2026?
Starting in 2026, all crypto trades conducted in 2025 through digital asset brokers will be reported directly to the IRS using Form 1099-DA. This marks a major shift in how the IRS collects crypto tax data—and it will likely trigger widespread audits and possible criminal investigations for non-compliant taxpayers.
Kemmerer warns:
“If crypto investors fail to report their taxes accurately, especially after the rollout of 1099-DA, they could receive a CP2000 letter or face severe action.”
Final Word: A Crucial Grace Period for Crypto Users
The current wave of warning letters serves as a wake-up call for investors. This is a grace period—a final opportunity to get crypto tax filings in order before the IRS enforces stricter penalties. Investors are urged to:
- Organize transaction history
- Track cost basis and taxable events
- File or amend returns proactively
Avoiding action now could lead to audit risks, fines, or worse once 1099-DA becomes mandatory.
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FAQs
The IRS (Internal Revenue Service) is the U.S. federal agency responsible for collecting federal taxes and enforcing the nation’s tax laws. Its primary function is to fund government operations by collecting revenue.
The IRS is sending letters to increase financial transparency in crypto and prepare investors for the upcoming 1099-DA regulation, aiming to ensure accurate tax reporting and compliance.
Ignoring these letters could lead to serious investigations, including audits, fines, or even criminal investigations, especially after Form 1099-DA becomes mandatory.
Investors should organize their transaction history, track cost basis, identify taxable events, and proactively file or amend returns to avoid future penalties and audits.
Yes 
No 
