On March 5, 2026, the Internal Revenue Service (IRS) and the Department of the Treasury issued a significant proposal that could fundamentally change how crypto investors receive their tax documents. The proposed regulations (IR-2026-29) would permit digital asset brokers, such as Coinbase and Kraken, to provide Form 1099-DA statements exclusively through electronic delivery without first offering a paper option. This move is designed to reduce the “unnecessary burden” and high costs associated with printing and mailing millions of physical forms, many of which contain hundreds of pages due to the high transaction volume of active crypto traders. Under the new rules, brokers would no longer need to obtain an affirmative “opt-in” for electronic delivery nor provide a way for customers to withdraw that consent, provided they meet enhanced electronic notice and accessibility requirements. The IRS justified this shift by noting the “inherently electronic nature” of digital assets, arguing that users who trade on digital platforms are already proficient in managing their financial affairs online.

Phased Implementation and the Debut of Form 1099-DA

The proposal arrives as the first official filing season for Form 1099-DA gets underway. This new form, which replaces the use of Form 1099-B for digital assets, is a dedicated report for proceeds from broker transactions involving cryptocurrencies, stablecoins, and NFTs. For the 2025 tax year (filing in early 2026), brokers are required to report gross proceeds to the IRS, providing the agency with its first direct, standardized line of sight into taxpayer digital asset activity. However, the IRS has introduced a phased implementation to help the industry adapt; while gross proceeds are mandatory this year, mandatory “cost basis” reporting (the original purchase price) will not begin until the 2026 tax year. This means that for the current tax season, many investors may still need to perform independent forensic accounting to accurately calculate their gains and losses. The IRS has signaled that it will not impose penalties for “good faith” reporting errors during this 2026 transitional period, recognizing the significant technological “growing pains” faced by both brokers and taxpayers.

Automating the Tax Gap Through Mandatory Reporting Requirements

The ultimate goal of the digital-only proposal and the introduction of Form 1099-DA is to close the “compliance gap” that has historically plagued the crypto sector. By requiring brokers to file these forms directly with the IRS, the agency can now utilize automated “matching” programs to flag discrepancies between a taxpayer’s reported income and their exchange activity. This transparency is expected to significantly reduce underreporting, as the IRS will automatically receive detailed data on disposal prices and transaction dates for every user of a U.S.-based exchange. Furthermore, the proposed rule change allows brokers to terminate relationships with clients who refuse to accept electronic delivery, effectively mandating a digital-first approach to crypto tax compliance. For the 2026 taxpayer, these changes signal the end of the “analog era” of crypto accounting, moving toward a fully integrated and transparent regime where the burden of data collection shifts from the individual to the platform.