The IRS took two distinct tones in the letters. Some mailings informed recipients that they may have tax obligations of which they weren’t aware and simply urged them to file an amended or delinquent return.

Another version took a harsher approach. Those letters give recipients a deadline to respond in writing and reveal everything about their crypto dealings from 2013 through 2017. And they must do so under penalty of perjury -- a sign that the nation’s tax collector may think they’re concealing high-dollar transactions that the agency could potentially turn into a legal test case.

‘Strong Cases’

The letter also warns that the agency will crosscheck the taxpayer’s response against information “received from banks, financial advisors, and other sources for accuracy” and warns of the potential for audits.

People with lots of virtual-currency transactions they haven’t previously reported shouldn’t amend their returns -- that’s basically admitting that you committed a crime, Creech said. Those taxpayers should immediately talk to a lawyer, he said.

“The IRS generally looks for very strong cases at the outset if they are considering criminal prosecution,” said Mark Matthews, a tax lawyer at Caplin & Drysdale and a former deputy IRS commissioner. “Anyone who got the harsh letter and who doesn’t respond truthfully and completely could become a test legal case.”

‘Big Fish’

“Most of the big fish” are disclosing their crypto transactions on tax returns “because they know they have a lot to lose” if they don’t, said Sean Ryan, chief technology officer of NODE40, a blockchain accounting and tax software company. Still, some aren’t putting details on their returns. “When you have millions of dollars on the line, sometimes people are willing to take on that risk.”

Those who got the gentler letters likely include parents of dependent high-school and college-age children who may have bought and sold crypto without their parents knowing or understanding how to report it, Moore said. Such people should file an amended return, she said.

Other taxpayers who got letters may occasionally dabble in Bitcoin and might not even owe any tax because they’re holding on to their virtual currency. The IRS requires taxpayers to report all crypto sales, even if no tax is owed because they produced a loss.