IRS Pushes Digital-Only Crypto Tax Forms in New Proposal

The United States Internal Revenue Service (IRS) has proposed a regulatory change that could reshape how cryptocurrency investors receive their tax documentation.  

IRS Proposal Signals a Shift Toward Digital-Only Tax Reporting

A new proposal from the IRS would allow brokers to provide tax forms electronically without offering paper copies if customers consent through a new process, eliminating the obligation to offer paper copies. The move is part of a broader regulatory framework aimed at modernising reporting systems as crypto trading volumes grow and improve digital asset taxation consistency. 

The IRS has proposed a regulation that would allow crypto exchanges and brokers to send tax forms, particularly the newly introduced Form 1099-DA, to customers solely through electronic channels.

Current rule:

• Paper is the default

• Electronic delivery requires affirmative customer consent

The proposal:

• Allows brokers obtain consent through a simplified process

• They do not need to offer paper as an option if that process is used.

The proposal states that exchanges may require users to consent to electronic document delivery to maintain an account. In some cases, brokers may terminate relationships with customers who refuse to receive their tax documents electronically.

Additionally, once a user agrees to receive forms electronically, they cannot withdraw prior consent for electronic delivery. This policy would apply broadly to custodial crypto exchanges, payment processors, hosted wallet providers, and other intermediaries required to issue digital asset tax statements.

A Step Toward Automated Crypto Tax Compliance

The electronic delivery proposal is closely tied to the rollout of the IRS’s new digital asset reporting system. At the centre of that framework is Form 1099-DA, a standardised reporting document designed specifically for crypto transactions.

Beginning with activity in 2025, digital asset brokers must report transaction proceeds to the IRS and provide the same information to customers through this form. The proposal noted, 

“Brokers required to make these returns must include identifying information of the customer, such as the customer’s name and tax identification number (TIN), and such other relevant information, including the gross proceeds from the transaction.”

According to the IRS proposal, electronic delivery would help streamline the reporting process by reducing administrative costs, accelerating document distribution, and ensuring standardised access to tax records.

The Rise of Crypto Reporting Infrastructure

The push toward digital-only tax form delivery highlights how rapidly institutional oversight of cryptocurrency is evolving in the United States. Several regulatory milestones illustrate this shift:

• Mandatory broker reporting: Starting with 2025 transactions, brokers must begin reporting crypto transaction proceeds through Form 1099-DA.
• Expanded reporting scope: Exchanges, payment processors, and hosted wallet providers must report certain customer transactions directly to the IRS.
• Tax filing alignment: Individuals are required to report income, gains, or losses from digital assets, and taxpayers are required to provide copies of the same information they report to the IRS, generally by mid-February each year.

The IRS defines digital assets broadly to include cryptocurrencies, stablecoins, and non-fungible tokens (NFTs), all of which are treated as property for tax purposes in the US.

The National Cryptocurrency Association (NCA) noted through survey data that one in five Americans, or about 55 million individuals, hold digital assets in the US. In the NCA survey, 10% of the 54,000 respondents cited digital asset taxes as an issue. 

If the IRS proposal is implemented, the change would mark another step toward aligning crypto taxation with the infrastructure used for conventional financial markets.