IRS Proposes Electronic-Only Crypto Tax Form Delivery Rule

TLDR

• The IRS has proposed a rule allowing crypto exchanges to deliver tax forms only through electronic channels.
• The proposal would remove the requirement for brokers to offer paper copies of Form 1099-DA.
• Exchanges could require customers to accept digital delivery to maintain their accounts.
• The rule would apply to major U.S. crypto platforms such as Coinbase and Kraken.
• Brokers must report gross proceeds from digital asset trades starting January 1, 2025.

The Internal Revenue Service (IRS)  has proposed a rule that would allow crypto exchanges to send tax forms only through electronic delivery. The agency filed the proposal on Thursday as part of its expanding digital asset reporting system. The change would let brokers require customers to accept digital tax documents to keep their accounts.

IRS Moves to Mandate Digital Delivery for Coinbase and Kraken

The IRS outlined the proposal in a public filing and opened it for comment. The agency said brokers would not need to provide paper Form 1099-DA copies without customer consent. The proposal states, “These proposed regulations would generally not require brokers to furnish the 1099-DA statements on paper to any customer that does not consent to receiving these statements electronically.” The rule would allow exchanges to end services for customers who refuse electronic delivery.

The proposal would apply to U.S.-regulated custodial brokers such as Coinbase and Kraken. These platforms could distribute Form 1099-DA through account dashboards or by email. In the past, brokers had to offer customers a paper option for tax reporting. The new rule would remove that requirement and shift delivery to digital channels.

Expanded Reporting Framework Under Infrastructure Law

The proposal comes as new digital asset reporting rules take effect. Starting with transactions on or after January 1, 2025, brokers must report gross proceeds from digital asset sales on Form 1099-DA. The IRS created this form to track crypto activity under broker standards.

Later this year, brokers must also report cost basis information for digital asset transactions. This data will allow the IRS to calculate gains and losses from crypto trading automatically. The reporting framework stems from the Infrastructure Investment and Jobs Act, which extended broker rules to digital assets. Lawmakers passed the act in 2021 to strengthen tax compliance across financial markets.

The IRS has received public input on digital asset reporting rules. During earlier consultations, the agency collected tens of thousands of comments from industry participants and taxpayers. The proposal now enters a public comment period before any final approval.

Last year, crypto tax software platform CoinLedger reported a rise in users receiving IRS warning letters. The most common letter reminded recipients that crypto transactions may trigger tax obligations. The IRS continues to expand its oversight as the electronic delivery proposal moves through the review process.

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