Justia Lawyer Rating
ABA
Bitcoin
Federal Bar Association
YELP
Google Reviews

What IRS Letters 6173, 6174, 6174-A Mean for Crypto Users

By Alexander Kugelman | June 25, 2020

IRS Letters
Alexander Kugelman, a tax controversy lawyer with expertise in cryptocurrency and IRS audits, joined the BitcoinTaxes Podcast to discuss IRS Letters 6173, 6174, 6174-A

Cryptocurrency tax attorney Alexander Kugelman appeared on the BitcoinTaxes Podcast with Salvatore Vescio to discuss the purpose behind IRS Letters 6173, 6174, and 6174-A and what they mean for crytpo users and traders.

Listen to the full podcast and read the highlights below.

IRS Educational Letters 6173, 6174, 6174-A

What are the Differences Between the Three IRS Letters?

“The basic thrust is that the IRS has information that the recipient had some cryptocurrency account and may not have fully reported gains or losses from the activity,” Alexander explained. “The 6174 is what’s been termed, or people have described as, a ‘soft notice’ – just putting people on notice of what the tax reporting obligations are. The 6174-A is a little bit more direct. The 6173 from my perspective is the letter to be taken more seriously by recipient because it requires a response.”

What are the Two Goals Behind the IRS Sending Those Letters?

“One is for (each recipient) to address any outstanding issues – voluntary compliance to get as many people in compliance to all tax reporting obligations. The second, which I think has been really effective, is to spread this news to a wider audience – this was all over the Internet. That’s exactly how the IRS motivates people to comply with tax laws: get the word out and get people thinking ‘right now I have to really take this issue seriously’.”

What Should These IRS Letters Mean to Cryptocurrency Users and Traders?

“For people who just purchased and held onto crypto, what you want to do is just keep good data, good records, but you really don’t have anything to do. However, if you did receive the 6173, then you would respond.”

“For people who had net losses…the taxpayer made a bunch of trades, ultimately came out on the short end of the stick and had losses and didn’t report anything because they don’t have any additional tax owed. Subjectively that might be true, but objectively that’s a major problem. If the data provided by the exchange shows a certain number of taxable events or sales it’s not clear from that data that there’s going to be a basis that exceeds what the sales price is. For people that are in that boat, I would highly recommend that they amend returns so you’re actually showing each of the transactions and how you arrive at that figure.”

“If you got the letter…you’re now part of a pool of certain taxpayers that has a lot of scrutiny.”

We can Help with Your Cryptocurrency Tax Compliance

Kugelman Law is a tax law firm experienced with cryptocurrency tax reporting. We have helped hundreds of taxpayers account and report cryptocurrency gains and losses.

Our tax lawyers in California are experienced with recreating missing trading data and dealing with high volume and complex trading activity. Let our team of experienced attorney and tax professionals bring you into compliance, defend you in your audit, or represent you in a criminal investigation.

Contact us today.

Client Reviews
★★★★★
Alexander helped me break down my tax situation and used his expertise to figure out the next actionable steps, make sure that all the bases were covered (that I wasn't aware even existed), and confirm that things were done correctly. If you are confused and stuck in a difficult tax situation, Alexander will guide you forward and help you confidently resolve the issue. Henry Wang
★★★★★
If you are having tax trouble, Alexander is the one to help you. He was very professional, personable, and easy to reach. His explanation of the entire process is helpful for easing the stress that is associated with tax trouble. We never felt intimidated or out of the loop while working with him. The process was handled to our liking and we are satisfied with the results. Even the after care has been phenomenal! Tony W.
★★★★★
If anyone out there is in need of stellar legal tax assistance, look no further and contact Alexander Kugelman. He helped me tremendously with my tax situation and is always there to help when needed. If I can give Alexander more stars, I would because 5 stars is not enough! Thank you for everything, Alex!!! Flo Lauzon
★★★★★
Alexander has been a life saver! I got dragged into some serious IRS issues with a complicated foreign assignment component, which included divorce. Alexander has been working with me to resolve directly with the IRS. Alexander is detail oriented, responsive and I trust him to guide me. I will be using Alexander for all tax related matters from now on! He is stuck with me forever. Eve T.
★★★★★
Alexander helped me understand the IRS audit process and prepared my response. There were certain records that I had lost, but he suggested alternatives that the IRS accepted. Even better, he showed up at the audit for me and I never actually had to talk with the IRS. I didn't have to pay any penalties. I'd definitely recommend hiring Alexander to deal with an IRS issue. L.R.