Internal Revenue Service

IRS Proposes Electronic 1099-DA Delivery for Crypto Exchanges

The IRS has proposed letting crypto exchanges deliver Form 1099-DA tax documents electronically. As the first 1099-DA season kicks off, here's what this proposal means for platforms and investors navigating digital asset reporting.

The Ripple Effect

05 Mar 2026 — 6 min read

The IRS has proposed allowing crypto exchanges to deliver tax forms to customers electronically — a practical update that could reshape how millions of digital asset investors receive their annual reporting documents. Here's what it means for the industry and you.

As crypto tax season hits full stride, the Internal Revenue Service is proposing a regulatory update that could quietly modernize how digital asset investors receive their most important annual document. According to a breaking report from Cointelegraph, the IRS has put forward a proposal that would allow crypto exchanges to deliver tax forms to their customers electronically, rather than relying on traditional paper-based delivery methods.

The timing is notable. Per the IRS's own guidance, brokers were required to send taxpayers a copy of the same information reported to the IRS on Form 1099-DA by February 17, 2026 — meaning tens of millions of crypto users are navigating this new reporting landscape right now. An electronic delivery option could dramatically simplify that process for platforms and investors alike.

Background: What Is Form 1099-DA?

To understand why this matters, it helps to know where we are in the IRS's broader crypto reporting rollout.

Treasury and the IRS issued final regulations on reporting by brokers on dispositions of digital assets for customers in certain sale or exchange transactions. This reporting is required on Form 1099-DA beginning with transactions on or after January 1, 2025.

Form 1099-DA, or the Digital Asset Proceeds from the Broker Transactions form, is a new tax form that brokers — including cryptocurrency exchanges, payment processors, and hosted wallet providers — must provide taxpayers to report digital asset sales or exchanges. This form is sent to both taxpayers and the IRS starting in early 2026 for transactions conducted during the 2025 tax year.

In short, 2025 marks the first year that crypto exchanges are operating under the same third-party reporting obligations that traditional stock brokerages have faced for decades.

The new rules are designed to clamp down on crypto tax evasion and compel brokers, such as crypto exchange Coinbase, to report all sales and exchanges of digital assets that took place during 2025 to the tax agency. The aim is to give tax authorities a clear view of investor gains and losses by opening up customer data inside exchanges for the first time, allowing the IRS to compare what crypto brokers report with what taxpayers file.

Why Electronic Delivery Matters

Today, the existing regulatory framework around delivering payee statements to recipients generally requires affirmative consent before brokers can furnish forms electronically. The IRS's proposal would update this framework specifically for digital asset brokers — acknowledging the obvious reality that most crypto investors already manage their entire exchange relationship online.

This change, if finalized, would allow platforms like Coinbase, Kraken, and Gemini to deliver 1099-DA forms through their existing digital infrastructure — email notifications, in-app document centers, or secure online portals — rather than physical mail. For an industry that never had a paper relationship with its customers, this is a logical evolution.

From a compliance standpoint, it also has practical implications for brokers racing to meet the new reporting requirements. Per the IRS's final regulations, for transactions occurring in calendar year 2025 and reported in 2026, the IRS will not impose penalties for failure to file and to furnish Forms 1099-DA if the broker makes a good faith effort to file and furnish associated payee statements correctly and on time. Electronic delivery would make it easier to document that good-faith effort.

The Bigger Picture: A Challenging First Season

The proposal arrives amid a genuinely complicated first year of crypto tax reporting. According to reporting by The Street, in its early phase the form will report gross proceeds only — not the investor's original purchase price, or cost basis. That omission could create confusion for taxpayers and potentially inflate their tax bills if they rely solely on the numbers provided on Form 1099-DA.

Andrew Duca, founder of Awaken Tax, noted that "Coinbase actually cannot send the right information, because if someone has bitcoin in a cold storage wallet and sends it to Coinbase to sell, Coinbase doesn't know the acquisition price. The 1099-DA form reports proceeds, but it doesn't report tax basis." He has characterized the current rules as a "blunt instrument" created by legislators unfamiliar with how crypto actually works.

Despite those limitations, as CNN Business has reported, 2025 is the first year that investors with accounts on centralized crypto exchanges are subject to third-party reporting. If you sold or exchanged crypto this year and conducted those transactions on a centralized exchange such as Coinbase, the exchange is now required to report your sales and exchanges to the IRS on Form 1099-DA.

The cost basis gap is set to close over time. Per Forvis Mazars, brokers will not be required to report basis for sales that occurred during calendar year 2025. The IRS has delayed this obligation to give brokers time to adapt to these new reporting requirements. Full cost basis reporting phases in for covered digital assets acquired on or after January 1, 2026.

Regulatory Angle

This proposal sits within a broader IRS effort to modernize compliance infrastructure for digital assets. According to Bankrate, the new crypto tax rule represents a step toward better transparency and accountability in the cryptocurrency space — and while the initial phase focuses on custodial platforms, regulations will evolve to include DeFi and other aspects of the crypto ecosystem.

It also aligns with the current administration's stated interest in a more functional framework for digital assets. The IRS has issued multiple pieces of transition relief — including Notice 2024-56 and Notice 2025-33 — acknowledging that the industry needs time to build the technical infrastructure necessary to comply.

Allowing electronic delivery would be consistent with that spirit of practical accommodation. It doesn't reduce reporting obligations — it makes meeting them easier for brokers operating in an inherently digital environment.

What Investors Should Know Right Now

Regardless of how the electronic delivery proposal ultimately lands, your 2025 tax obligations remain unchanged. Here's what matters:

You must report all taxable crypto activity, whether or not you receive a Form 1099-DA. The IRS is explicit on this point: every taxpayer must report any related income, gains, or losses — and must answer the digital asset question on their return whether or not they hold crypto.

Your 1099-DA may be incomplete. For 2025 transactions, most forms will show gross proceeds only — not cost basis. You remain responsible for calculating your actual gain or loss using your own records.

Keep your own records. Due to the limitations of broker-only reporting, maintaining complete transaction records across wallets and exchanges remains essential. Crypto tax software can help automate the reconciliation process.

Verify any form you receive. As Koinly has noted, given that the IRS has excluded basis reporting for 2025, there will be many inaccurate 1099-DA forms in circulation. It is far more likely the IRS will be using 1099-DAs to target investors who are entirely omitting or underreporting disposals or gains — not to penalize honest discrepancies.

Key Takeaways

The IRS's proposal to allow electronic delivery of 1099-DA forms is a narrow but meaningful modernization of how crypto tax documents reach investors. It doesn't change what must be reported — it recognizes that digital-native platforms should be able to operate in a digital-native way. For crypto investors, the practical priority remains the same: reconcile your transaction history, don't rely solely on your exchange's form, and consult a qualified tax professional if you have complex holdings or multi-platform activity.

DISCLAIMER

This newsletter is for informational purposes only and does not constitute investment advice, advertising, or a recommendation to buy, sell, or hold any securities. This content is not sponsored by or affiliated with any of the mentioned entities. Investments in cryptocurrencies or other financial assets carry significant risks, including the potential for total loss, extreme volatility, and regulatory uncertainty. Past performance is not indicative of future results. Always consult a qualified financial professional and conduct thorough research before making any investment decisions.