With the new regulation proposed by the US Internal Revenue Service (IRS), millions of users on cryptocurrency exchanges may now have to receive their tax documents digitally rather than by mail. This regulation on the IRS’s agenda allows exchanges to file Form 1099-DA only electronically. The form in question is used to report digital asset purchases and sales, and exchanges may be given the right not to work with customers who refuse electronic delivery in the future.
Electronic Tax Declaration Period
Under current rules, crypto brokers must provide their clients with tax forms in both paper and digital form. With the new proposal, the user’s approval of electronic delivery during account opening will be considered essential, and the accounts of users who do not give this approval may be considered to be closed. The approval process will usually be carried out through the application with the “I accept” option.
Customers who approve electronic delivery once may lose the right to withdraw this approval as long as they remain a customer. If there is a problem with e-mail delivery, only notification letters will be sent by mail, but no full tax document will be sent.
Key Changes in Reporting
The IRS proposal does not make any changes to the content of the data brokerage firms submit to the government; only the way these documents are transmitted to users is moved to digital platforms. That is, exchange applications will share forms via email or in-app document centers. Documents will need to be accessible to users until mid-October of the year following the end of the relevant tax year and will be required to be archived for seven years.
The new system envisages following the process digitally with notifications from applications, instead of customers encountering a paper form in the mailbox every tax season. For those who use physical forms as reminders, this change requires adaptation to the process.
Expansion of Taxation and Audit
Starting in 2025, cryptocurrency exchanges will begin reporting the total transaction amount on Form 1099-DA. Profit/loss account with cost information for certain assets will also be included in the system in some transactions as of 2026. According to the latest data from the US Government Accountability Office, the detection of unreported income by automated audit systems reached a potential of $6.6 billion in more than 1 million files in one year.
While data shows that approximately 6.5% of individuals report transactions made with cryptocurrency, research reveals that these rates remain much lower compared to those who own crypto. The IRS estimates that 75 percent of those who own digital assets do not meet their tax obligations.
The main goal of the proposed electronic delivery application stands out as standardizing automatic dispute detection and audit processes for tax authorities, rather than reducing declaration obligations.
Practical Results for Users
For users waiting for paper documents during the tax season, the process will now be managed with a file notification via e-mail or application. It is important for users to keep their contact information up to date and check their spam boxes regularly in case tax documents are forgotten or overlooked. Documents will be available in the platform’s document center or email attachment, and users will have access to past transactions for seven years.
Exchanges will be able to offer customer-specific preferences from digital or physical delivery options, due to their own business processes. However, since the regulation provides the legal infrastructure to popularize digital delivery, digital tax declaration may become a standard in the future.
Similar approaches are adopted in taxation processes at the international level. Regulations such as the OECD’s Crypto-Asset Reporting Framework and the EU’s DAC8 directive point to standardization in reporting crypto assets. The new digital delivery offering in the US is also seen as part of this global trend.
