Refusing new IRS crypto tax forms could cost you your exchange account

The Internal Revenue Service (IRS) has proposed a new rule that could require cryptocurrency exchanges to file tax documents like Form 1099-DA electronically, potentially eliminating paper mailings for millions of users. This shift, part of a broader compliance buildout, would allow exchanges to make electronic delivery mandatory, with customers who refuse facing possible account termination. The comment period for this proposal closes on May 5, 2026.

Key Changes in Tax Reporting

Under the proposed alternative electronic delivery process for Form 1099-DA, brokers would no longer be required to offer paper forms. Customers would likely consent to electronic delivery during account setup, and exchanges could prevent users who decline from continuing their services. Once consent is given, users may not be able to withdraw it. Tax forms would be delivered via online document centers with email notifications or as direct email attachments. Exchanges must maintain access to these forms through October 15 of the following year and retain prior statements for seven years. A paper notice would only be sent if email delivery fails, not the full tax document.

The core change is in the customer delivery method, with the potential disappearance of a mandatory paper option. While broker reporting to the government remains unchanged, customers may find their tax forms exclusively in digital formats.

Broader Enforcement and Compliance Efforts

This proposal is integrated into a larger IRS compliance strategy. Starting with transactions on or after January 1, 2025, crypto brokers must file Form 1099-DA reporting gross proceeds. Basis reporting, crucial for calculating gains and losses, will phase in for certain assets starting January 1, 2026. The IRS aims to address significant noncompliance, with an internal study estimating up to 75% of taxpayers with digital assets are noncompliant. The Joint Committee on Taxation projects these reporting provisions could raise approximately $28 billion over 10 years.

The electronic delivery proposal is seen as a move to standardize infrastructure for automated compliance, making enforcement more efficient. Information returns are submitted digitally to the IRS regardless of the customer's delivery method, enabling automated matching against broker reports.

Impact on Retail Users

For retail users, the shift means tax season will transition from receiving physical mail to digital notifications and document centers. This could create new challenges for users who rely on paper forms as a reminder to file. Exchanges will likely integrate consent into onboarding processes, making it a routine part of account terms. Users must ensure their contact information is current and regularly check spam filters, as email delivery is dependent on these factors. While historical forms will be accessible for seven years, users need to actively manage their access through platform tools.

With platforms like Coinbase reporting millions of users, a significant volume of tax documents could move exclusively to digital channels if this proposal is finalized and adopted.

Future Outlook and User Recommendations

The IRS proposal is open for public comment until May 5, 2026, with potential implementation for tax forms furnished on or after January 1 of the following year, affecting tax season 2027 or later. While the proposal permits electronic-only delivery, it does not mandate it, leaving adoption rates to individual exchanges. However, users should anticipate electronic delivery becoming standard.

Users are advised to treat exchange email settings as critical tax infrastructure, maintain current contact information, enable document notifications, check spam filters, and regularly download and back up trade history, especially for multi-platform transactions. This move aligns with global trends like the OECD's Crypto-Asset Reporting Framework and the EU's DAC8 directive, indicating a broader shift towards standardized crypto tax reporting and making enforcement more automated and less visible to inattentive users.