IRS Sends Hundreds of Crypto Tax Warning Letters to Investors

The Internal Revenue Service (IRS) has significantly ramped up its enforcement efforts targeting crypto investors, sending a surge of tax warning letters across the United States. This intensified push comes as the agency aims to address discrepancies in digital asset filings, signaling a more aggressive stance on crypto tax compliance.

Over the past two months, the IRS has dispatched hundreds of notices to individuals involved in crypto transactions. This wave of letters has raised alarms within the crypto community, prompting tax experts to advise investors to review their filings and prepare for potential audits. The volume of these letters has grown substantially compared to previous years, indicating a heightened focus on digital asset enforcement.

CoinLedger, a popular crypto tax filing platform, reported receiving nearly 800 customer inquiries related to “IRS letters” between May and June 2025, marking a nearly ninefold increase from the same period in 2024. Legal professionals are also experiencing a surge in cases. Jordan Bass, a crypto tax attorney, noted that his firm has handled at least 10 such cases recently, a sharp rise from none the previous year. Andrew Gordon, another attorney, reported receiving several inquiries weekly from concerned investors.

The current wave of IRS letters echoes earlier crackdowns in 2020 and 2021, when the agency sent compliance letters to individuals after obtaining user data from major crypto exchanges, including Coinbase. That effort was initiated by a 2017 court order that compelled Coinbase to hand over customer records. This time, speculation is rife about a possible link to Poloniex, a crypto exchange whose past users seem to be disproportionately affected. While the IRS has not confirmed acquiring new transaction data, the pattern of letter recipients suggests a connection.

Both Gordon and CoinLedger CEO David Kemmerer observed that many individuals receiving letters had accounts on the platform. The content of the IRS letters varies, with two versions being more advisory, encouraging recipients to review and verify their reported transactions. A third version is more assertive, demanding either amended tax returns or detailed explanations for existing filings. Kemmerer remarked that such outreach typically follows when the IRS gains new access to data, adding that he is sure there are just people randomly getting selected and the lucky ones get these scary letters.

U.S. taxpayers are legally required to report all taxable crypto transactions, including selling or swapping tokens, staking or mining rewards, and certain gifts. While investors can claim losses, failure to report gains can result in steep penalties. As the IRS intensifies its scrutiny, experts advise crypto holders to double-check their filings and consider seeking legal or accounting advice if they receive a letter. With digital assets now firmly on the taxman’s radar, crypto investors may need to brace for a new era of heightened regulatory attention.

The IRS's enforcement push is part of a broader effort to address the growing complexity of crypto tax reporting. With the rise of digital currencies, the IRS has faced challenges in tracking and taxing crypto transactions, which often involve complex and opaque processes. The warning letters are part of a broader effort to educate investors about their tax responsibilities and to encourage voluntary compliance. The letters inform recipients of their potential tax liabilities and provide guidance on how to correct any past reporting errors.

The IRS's actions have prompted a mix of reactions from the crypto community. Some investors have expressed concern and panic, fearing potential penalties and legal consequences. Others have welcomed the increased scrutiny, viewing it as a necessary step towards legitimizing the crypto industry and ensuring fair taxation. Tax experts have advised investors to take the warnings seriously and to seek professional help if needed to ensure compliance with tax laws.

The IRS's enforcement push is part of a broader trend of increased regulatory scrutiny of the crypto industry. In recent years, regulators around the world have taken steps to address the risks posed by digital currencies, including money laundering, fraud, and market manipulation. The IRS's actions are a reminder that crypto investors must comply with tax laws and regulations, just like any other form of investment. As the crypto industry continues to evolve, it is likely that regulators will continue to adapt their approaches to ensure that the industry operates in a safe and transparent manner.