An IRS Letter About Crypto Arrived and You Have Four Years of Trades and No Records

Find the number in the corner before you read another word

The envelope has been on the kitchen table for two days and you've read it four times. Somewhere in the second paragraph it says "virtual currency." Somewhere near the top right there's a code — 6174, or 6174-A, or 6173, or CP2000.

That code is the most important thing on the page, and it's the part almost nobody reads first.

These are not the same letter. They don't want the same things from you. Treating them as one category is how people end up either sick with dread over a courtesy notice or sailing straight past a deadline on the one that has a clock.

Letter 6174 is educational. It sets out the reporting rules, doesn't accuse you of anything, and requires no response. If you know a return was wrong, amending is still the right call — but the letter itself isn't asking.

Letter 6174-A is the same idea with a sharper edge. The IRS says it has information suggesting you may not have properly reported your transactions involving virtual currency. Still no response required. "No response required" and "nobody is looking at you" are different sentences.

Letter 6173 is the one with the date on it. It asks you to respond by that date — with amended or delinquent returns, or with a statement, signed under penalties of perjury, explaining why you believe you already complied. The letter says that if you don't respond, your account may be referred for examination.

A CP2000 isn't a crypto letter at all. It's a proposed change to one specific return, generated when a third party reported a figure to the IRS that doesn't match what you filed. It has its own response window printed on it. It is a proposal, not a bill. And on crypto it is very often wrong, for a reason worth understanding.

Go find your code. Then come back.

Why the IRS thinks you made money you never made

Say you bought on an exchange, moved coins to a hardware wallet, moved them again to a second wallet, sent some to a DeFi protocol, pulled them back, then sold a slice on a different exchange three years later.

You moved your own property between your own pockets. Under the IRS's own treatment of virtual currency as property, moving it between wallets you control isn't a disposition and doesn't trigger gain. That part is not controversial.

The reporting doesn't know that. Third-party reporting has historically captured gross proceeds — what left, at what price — without any idea what you paid for it or whether the coins arriving in an account were a purchase or your own transfer landing. So a machine adds up the outflows and produces a number that looks like income. Six wallets and two exchanges can generate a paper trail suggesting enormous sales activity from a person who, netted out, is roughly flat.

None of which is a defense you can assert over the phone. You have to show it.

The reconstruction, in the order that actually works

Most crypto tax software assumes you can export clean CSVs from exchanges that still exist. If yours are gone, start somewhere else.

Bank and card statements first. Every dollar you ever wired in, and every dollar that ever came back out. It's the strongest evidence you own, because it's third-party, contemporaneous, and nobody can accuse you of having written it yourself. If your fiat in was, say, $52,000 across four years and your fiat out was $61,000, you have a hard, third-party record of your net cash position. That is powerful context, but it is not a ceiling on taxable gain — crypto-to-crypto trades, coins you spent, and coins you received as income are all taxable without ever touching a bank account.

Now the address list. Every address you controlled, including the ones you're sure are empty. With an HD wallet, the extended public key hands you the whole tree instead of the four addresses you happen to remember.

Then the explorers. Etherscan and its equivalents on other chains will export an address's transaction history, and this is where most of the real work lives. Export limits apply — Etherscan's CSV export tops out at 5,000 rows — and some explorers now want an account first, so pull in chunks, keep every raw download exactly as it arrived, and rename nothing. The timestamps are on-chain and were written as the transactions happened, by machines, while you were doing something else entirely. That's the whole reason any of this is reconstructable four years later. You are not remembering. You are reading.

Label the internal transfers before you touch anything else in the sheet.

That one step is what turns an apparent pile of sales back into what it actually was.

Dead exchanges are the tedious part. Failed platforms usually leave a claims administrator behind, and those portals have produced account statements for creditors. Your own email archive is the other seam worth mining: deposit confirmations, trade confirmations, monthly statements, and password-reset mails that prove nothing except that an account existed on a particular date. That last category sounds worthless. It isn't.

Pick a basis method and hold it. Specific identification requires records tying a specific unit to its acquisition date, basis, sale date and proceeds. No records, no specific ID. Note too that the rules on tracking basis across wallets changed for years beginning in 2025 — Revenue Procedure 2024-28 moved things to a per-wallet footing — so an older year and a recent year may not be handled the same way. Your preparer needs to know which of your years fall on which side of that line.

Last, the memo. Dated, written while the work is fresh. What sources you used, what you assumed, why. A documented method you can defend is a completely different object from a number you produced and can't explain. Courts have accepted reasonable estimation where records were destroyed through no fault of the taxpayer — the Cohan rule — but that's a doctrine with limits, not a license, and it goes considerably better when you can show your work.

What zero basis costs, arithmetically

If you can't establish what you paid, the default position is that you paid nothing. Every dollar of proceeds is gain.

Imagine the explorers show $180,000 of gross proceeds across four years. At zero basis, that's $180,000 of gain to be taxed. If your reconstruction shows you actually spent $164,000 acquiring those coins, the number becomes $16,000. Same trades. Same wallets. The entire gap is documentation.

That's the argument for spending a weekend on spreadsheets before you spend a dollar on an hourly rate.

Where you stop and a professional starts

Responding to the IRS is not a DIY project, and I'd say that even if the letter were friendlier. A 6173 response is signed under penalties of perjury. That sentence alone should end the debate.

Get a CPA or an enrolled agent for the reconstruction and the returns. But if there's any realistic chance the omission was deliberate rather than disorganized, talk to a tax attorney first — the federal accountant privilege in IRC 7525 doesn't extend to criminal matters, and an attorney who then engages the accountant is the standard way to keep the work inside privilege. Getting that order wrong is expensive and can't be undone.

If it's one in the morning and you're still trying to work out whether 6174-A is the bad one, TrueTalk's Crypto Carl will talk it through — an AI persona with a blockchain background, working on crypto investment and digital assets. It can't sign anything, it isn't your CPA, and it can't respond to the IRS on your behalf. What it's for is the hour before the appointment: which letter you're actually holding, which chains and wallets you need to pull, and what's a real problem versus what only looks like one in the dark.

Where the reconstruction just stops

Some of this won't apply to you. If you used privacy tooling, or traded on platforms that never produced records of any kind, or bridged across chains that don't reconcile cleanly, reconstruction may genuinely be partial. Where nobody can know, say so in the memo rather than inventing a number that looks tidy.

And if the code on your letter is 6173 or CP2000, the date printed on it is real. Reconstruction takes weeks. Finding a professional in filing season takes longer than you'd think.

Start with the bank statements. Tonight, if you can.