The US Internal Revenue Service (IRS) is seeking to require electronic filing of tax forms by crypto exchange users.
Under current rules, exchanges must provide paper copies of the 1099-DA tax form, the IRS tax form used to document crypto transactions from an exchange or centralized broker, if users request paper forms.
Proposed new rules, due to be published on Friday, would eliminate that requirement and allow brokers to “terminate” their relationships with existing clients if they opt out of electronic transmission of tax forms.
In addition, the IRS proposal also prohibits users from withdrawing consent to electronic forms.
The IRS requires all broker-dealers, platforms that offer cryptographic services to users, such as exchanges, to report the user’s revenue from each transaction and provide users with a 1099-DA form detailing their transaction history during tax season.
However, exchanges are not required to track cost basis for tax year 2025; It is the investor’s responsibility to keep track of the cost or price paid for each investment purchase. The IRS has defined reporting requirements for brokers:
“Brokers required to file these returns must include customer-specific information such as the customer’s name and tax identification number (TIN) and other relevant information, including gross transaction revenue.”
According to the National Cryptocurrency Association (NCA), a crypto advocacy group, one in five Americans, or about 55 million people, own digital assets in the US.
Tax compliance was one of the biggest barriers to crypto adoption, with 10% of the 54,000 respondents to the NCA survey citing digital asset taxes as an issue.
According to the NCA, more than one-third of respondents said they wanted more information about the tax implications of digital assets.
related to: Blockchain crypto lobby association presents tax plan to Congress
Concerns are resurfacing after Trump killed the “DeFi broker rule.”
In December 2024, the IRS issued a rule that would classify all advanced services, including decentralized exchanges (DEX) and decentralized finance (DeFi) platforms, as broker-dealers and subject them to tax reporting requirements.
This meant that DeFi platforms had to collect information about their customers (KYC) and report revenue from user sales to the IRS.
US President Donald Trump signed a decree in April 2025 that killed the DeFi broker rule, which was well received by the crypto industry.
However, crypto industry leaders have warned about vague language in the CLARITY market structure project that could force KYC reporting requirements on DeFi platforms and limit activity in the innovation sector.
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