IRS Sends Warning Letters to Crypto Investors Ahead of 2026 Regulation

The Internal Revenue Service (IRS) has initiated a new wave of warning letters to crypto investors, signaling an impending crackdown ahead of the 1099-DA regulation, which is scheduled to take effect in 2026. This development has sparked concern within the crypto community, as many investors are grappling with confusion over reporting requirements.

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. Failure to address these warnings could result in 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. The IRS is intensifying its oversight of digital asset transactions as part of the U.S. push for greater 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 importance 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.”

Here are the key letters crypto investors are receiving: Letter 6174, which reminds investors to 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; and Letter CP2000, which indicates that the IRS has already calculated underreported income or tax owed, giving investors 30 days to respond.

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 represents a significant shift in how the IRS collects crypto tax data and is likely to 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.”

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 their transaction history, track cost basis and taxable events, and file or amend returns proactively. Avoiding action now could lead to audit risks, fines, or worse once 1099-DA becomes mandatory.