The Internal Revenue Service has proposed a rule that would allow crypto exchanges to submit tax forms only through electronic channels, eliminating the lengthy requirement to provide paper statements to clients.
Under the proposal, custodial crypto brokers could issue a digital Form 1099-DA and require users to accept electronic transfers as a condition of maintaining the account. Exchanges are also allowed to terminate relationships with clients who refuse digital tax returns.
The rule will apply to major U.S.-regulated platforms, including Coinbase and Kraken, which can distribute tax documents via online panels or email rather than traditional mail.
The changes come as the IRS expands its oversight of digital asset transactions through new reporting requirements. Starting with transactions on or after January 1, 2025, crypto brokers will have to report gross income from client digital asset trading on a new 1099-DA form specifically created for digital asset activity.
Additional reporting requirements will become even more extensive this year when brokers begin submitting cost-based information, allowing the IRS to automatically track profits and losses from crypto trading.
The reporting framework stems from the Infrastructure Investment and Jobs Act of 2021, which brought crypto transactions under brokerage reporting standards similar to those used for stocks and other securities.
The IRS previously received tens of thousands of public comments during previous consultations on digital asset reporting rules, reflecting growing involvement from the industry and taxpayers as the agency develops oversight of the crypto market.
