The IRS just proposed a new rule. Crypto exchanges must deliver Form 1099-DA electronically. Paper forms? Gone.
Here’s the kicker. Brokers can terminate your account if you refuse electronic delivery. That’s according to IRS Notice 2023-61. It’s a major shift in crypto tax reporting.
The agency says it’s about standardization. The digital asset sector is growing fast. “The proposed rules would further ensure that taxpayers receive the information they need to accurately report their tax liability,” according to IRS Notice 2023-61.
Brokers must report customer identity info. They must report gross proceeds from crypto transactions. Cost basis reporting won’t be required for 2025.
The IRS wants to streamline tax compliance. Crypto adoption is expanding. Survey data shows roughly 55 million Americans hold cryptocurrency. About 10% cite tax compliance as a barrier.
The proposal raises real concerns. Some users have limited digital access. Others prefer paper documentation. They’ll face a choice: accept electronic forms or lose exchange access entirely.
That’s a disadvantage for certain demographics. Especially those less comfortable with digital-only communication.
This isn’t the IRS’s first move. The agency has tried to bring crypto platforms under traditional financial reporting frameworks before. They’ve pushed to classify DeFi platforms as broker-dealers. The industry pushed back.
The rule represents another step. The government wants to close the tax reporting gap in crypto markets. Digital asset transactions have grown in volume. They’ve grown in complexity. Regulators want compliance tools comparable to traditional securities markets.
The electronic-only approach would improve efficiency. It’d reduce administrative costs for brokers and the agency. Theoretically.
But there’s friction. Exchanges are working to expand user bases. They’re trying to improve accessibility. Service termination over form delivery preferences adds a new compliance dimension. It extends beyond actual tax obligations.
The relationship between platforms and customers just got more complicated.
