IRS proposes mandating electronic delivery of tax forms for crypto

The U.S. Internal Revenue Service (IRS) is proposing new rules that would mandate the electronic delivery of tax forms to cryptocurrency exchange users, removing the current option for paper copies upon request. Under the proposed changes, crypto brokers would be able to terminate relationships with clients who refuse electronic tax form delivery. Additionally, users would be prohibited from retroactively revoking their consent for electronic forms.

Reporting Requirements for Brokers

Currently, exchanges are required to provide users with Form 1099-DA, which details crypto transactions, but only if paper copies are requested. The IRS requires all broker-dealers, including crypto platforms, to report user proceeds from each transaction and provide users with Form 1099-DA. For the 2025 tax year, brokers are not required to track cost basis, which remains the investor's responsibility. The reporting requirements mandate the inclusion of customer identifying information, such as name and Tax Identification Number (TIN), along with gross proceeds from transactions.

Crypto Adoption and Tax Compliance

Approximately 55 million individuals in the U.S., representing one in five Americans, hold digital assets, according to the National Cryptocurrency Association (NCA). Tax compliance is identified as a significant barrier to crypto adoption, with 10% of respondents in an NCA survey citing digital asset taxes as an issue. The survey also revealed that more than one-third of respondents desired more education on the tax implications of digital assets.

Background on DeFi Broker Rule

Concerns have resurfaced following the IRS's December 2024 rule that classified decentralized exchanges (DEX) and decentralized finance (DeFi) platforms as broker-dealers, subjecting them to tax reporting requirements and potentially necessitating Know Your Customer (KYC) information collection. This rule was later nullified in April 2025 when U.S. President Donald Trump signed a resolution, a move welcomed by the crypto industry. However, ambiguities in the stalled CLARITY market structure bill continue to raise concerns about potential KYC reporting requirements for DeFi platforms.