The U.S. federal government’s Internal Revenue Service (IRS) has come up with a crypto tax audit system. According to Clinton Donnelly, an expert in U.S. crypto tax law and IRS audits, warning letters are being sent to people whom the agency believes may have engaged in cryptocurrency transactions.
So for those unaware, there are three different types of letters being issued by the IRS. This includes Letter 6173, Letter 6174, and Letter 6174-A. Interestingly, none among the three are identical, and receiving one does not necessarily mean that a taxpayer is being formally audited.
All about the three different letters from the IRS
Letter 6174 is generally the least serious of the three and serves mainly as a compliance notice. Receiving it does not automatically mean an audit, but taxpayers should review their returns and correct any errors if necessary.
Letter 6174-A is similar but provides more detailed and direct guidance on crypto tax obligations. However, Letter 6173 is more serious because it requires taxpayers to sign a statement under penalties of perjury confirming their compliance or explaining their tax treatment.
Donnelly believes,
They [IRS] may be issuing roughly 10,000 letters per month and have been doing so for about a two years straight now.
Is the IRS favoring Donald Trump?
Now, while on one hand, the IRS is sending letters to common taxpayers. On the other hand, the Citizens for Responsibility and Ethics in Washington (CREW) has filed an amicus brief against the IRS on the 9th of September.
In the brief, they have argued that there is an alleged arrangement involving President Donald Trump, the IRS, and Treasury officials that is protecting Trump, his family, and affiliated businesses from certain tax audits.
This, according to CREW, violates the Constitution’s ‘Domestic Emoluments Clause.’
That said, the lawsuit centers on a $1.776 billion “anti-weaponization fund” and an alleged IRS immunity order that CREW, including the National Treasury Employees Union (NTEU), says could give President Trump, his family, and affiliated businesses special protection from tax enforcement.
The argument is particularly significant because tax audits were reportedly underway when the immunity order was signed. And CREW cites allegations that Trump could have faced more than $100 million in additional taxes related to claimed Chicago property losses.
Other countries and their tax rules
This comes on the heels of the UAE’s Federal Tax Authority introducing a new 2026 framework for handling cryptocurrency payments under VAT, requiring businesses to convert digital-currency transactions into UAE dirhams (AED) for reporting.
At the same time, France’s rising crypto kidnapping risk has been partly linked to concerns over tax-related data security. Earlier this year, Telegram founder Pavel Durov alleged that French tax officials were selling personal data to criminal groups, contributing to crypto kidnappings.
Final Summary
- The IRS sends different types of letters, which include Letter 6173, Letter 6174, and Letter 6174-A for the common taxpayers.
- But the arrangement with President Trump and his family is raising eyebrows.
