IRS proposes letting crypto exchanges like Coinbase require electronic delivery of tax forms

With the Internal Revenue Service's new system of keeping track of taxpayers' digital asset transactions, the tax authority has issued a proposal that could reduce the paper trail.

On Thursday, the IRS issued a proposal that would permit crypto brokers like Coinbase and Kraken to require the electronic delivery of tax forms reporting, for example, the gross proceeds from a digital asset trade, according to a filing. In the past, brokers had to offer their clients the option of receiving a paper copy.

The proposed rule change comes as a new system of reporting crypto transactions to the IRS takes hold. As of this year, crypto brokers must report both gross proceeds and cost basis of digital asset sales on Form 1099‑DA. This means the IRS automatically receives detailed gain/loss data for users, which should reduce underreporting and significantly increase compliance oversight for crypto holders.

"These proposed regulations would generally not require brokers to furnish the 1099-DA statements on paper to any customer that does not consent to receiving these statements electronically," the IRS proposal said. Additionally, brokers could terminate doing business with any client who refuses electronic delivery.

The proposed rule change has not yet been officially approved and is now subject to public commentary. In the past, President Donald Trump expressed interest in eliminating taxes on U.S.-based cryptocurrencies.

Last year, crypto tax software platform CoinLedger witnessed a massive increase in U.S. users receiving warning letters from the IRS. The most common letter provided a reminder that crypto transactions may be taxable and should be reported.