IRS Proposes Electronic-Only Delivery For Crypto Tax Forms Under New Reporting Rules

The U.S. Internal Revenue Service (IRS) has proposed a new rule that would allow cryptocy brokers to deliver crypto tax forms exclusively through electronic methods, eliminating the need to send paper copies to customers. The proposal is part of the agency’s broader effort to modernize reporting for digital asset transactions. 

Under the draft regulation, crypto platforms such as exchanges and brokerages could send tax forms online instead of mailing physical documents to users who trade digital assets. The rule has not yet been finalized and remains open for public feedback and comments before implementation. 

Shift Toward Digital-Only Tax Reporting

Currently, many brokers provide both paper and electronic tax forms to customers reporting cryptocy activity. If the proposal becomes law, brokers would generally be permitted to send these documents only in digital form, removing the requirement to deliver paper copies. 

The IRS says the change would streamline reporting while reducing administrative burdens for companies that must issue large numbers of tax forms each year. Brokers would still need to notify users electronically and ensure customers can access the information required for filing taxes. 

In some cases, brokers could even choose to stop doing business with customers who refuse electronic delivery, according to the proposed guidelines. 

How the New System Would Work

The proposal ties directly to the rollout of Form 1099-DA, a tax form specifically designed to report digital asset transactions such as cryptocy sales, swaps, and payments. 

This form requires brokers to report key information including:

• Gross proceeds from crypto sales

• Cost basis for digital asset transactions

• Transaction details linked to individual customers

The data is submitted to both the taxpayer and the IRS, allowing the agency to automatically track capital gains and losses from digital asset trades. 

The system is part of a broader regulatory framework introduced after U.S. lawmakers expanded reporting requirements for digital asset brokers through federal legislation. 

Why the IRS Is Making the Change

The IRS says the electronic-only system could make crypto tax reporting faster, more efficient, and less prone to errors. By sending forms digitally, brokers can deliver documents instantly and reduce the logistical costs associated with printing and mailing millions of forms. 

The proposal also reflects the agency’s increasing focus on crypto tax compliance. In recent years, the IRS has issued warning letters to cryptocy users reminding them that profits from digital asset trading are taxable income.