Crypto Brokers Can Ditch Paper 1099-DAs Starting 2027. Here's What Your Clients Need to Know.

The IRS just gave crypto brokers permission to ditch paper 1099-DAs - if they meet enhanced digital notice requirements.

On Thursday, the IRS and Treasury released proposed regulations allowing crypto brokers to skip paper Form 1099-DA statements and go fully electronic for digital asset transaction reporting. The new rules would apply to statements due on or after Jan. 1, 2027.

For CPAs with crypto clients, this means one thing: your clients may not get a paper tax form in the mail next year. They'll get a digital notice instead. And if they don't check their email or broker portal, they might miss it entirely.

Why the IRS Is Doing This

Crypto transactions are inherently digital. Most crypto brokers conduct business entirely online. Printing and mailing thousands of pages of 1099-DAs for active traders is expensive and inefficient.

Under current IRS rules, brokers must send paper 1099-DAs to any customer who doesn't affirmatively consent to electronic delivery. That means opt-in consent, paper as the default, and the ability to withdraw consent at any time.

The proposed regs flip that. Crypto brokers could skip paper entirely - without requiring customers to consent upfront - as long as they meet enhanced electronic notice and access requirements.

What Crypto Brokers Have to Do

The new rules aren't a free pass. Brokers who go paperless have to:

• Provide clear electronic notice that a 1099-DA has been furnished

• Ensure customers have continuing access to the statement

• Verify that email addresses are valid and statements are deliverable

• Not require customers to consent upfront or give them the option to withdraw consent

This is a big shift from the current consent-based system. Brokers won't have to offer paper as an option. They just have to make sure customers can access the digital version.

What CPAs Need to Tell Clients

Starting with 2026 tax year reporting (forms due in early 2027), your crypto clients may not receive a paper 1099-DA in the mail. They'll get an email notification or a portal alert instead.

If they ignore it, they won't have the form they need to file their taxes accurately. And if they miss transactions or underreport gains, the IRS will know - because brokers are still required to send 1099-DA data to the IRS directly.

CPAs should tell crypto clients now:

• Check your email for 1099-DA notices from your broker (Coinbase, Kraken, etc.)

• Log into your broker portal and download the 1099-DA before tax season

• Don't assume you'll get a paper form in the mail like you did in 2025

The Bigger Problem: Basis Tracking

Even with digital delivery sorted out, the real headache for crypto clients is basis tracking.

Crypto brokers weren't required to report cost basis for 2024 or 2025 transactions. They only had to report gross proceeds - the sale price. That left CPAs and taxpayers scrambling to reconstruct basis from wallet transfers, exchange history, and incomplete records.

Starting Jan. 1, 2026, brokers are required to report basis for crypto transactions. That should make 2026 tax year reporting (forms due in 2027) much cleaner.

But for 2025 returns due this spring, crypto clients are still on their own for basis. The 1099-DA shows gross proceeds only. If the IRS compares that to a return with missing basis, expect CP2000 notices asking why clients didn't report all that "income."

What's Next

The IRS is accepting comments on the proposed regs. The final rules would apply to 1099-DAs due on or after Jan. 1, 2027 - so 2026 tax year transactions reported in early 2027.

Crypto brokers are lobbying hard to make the reporting process easier. Coinbase, one of the largest U.S. crypto exchanges, has been vocal about the compliance burden of sending millions of 1099-DAs to users - many of whom had only a few small transactions.

For CPAs, the takeaway is simple: prep your crypto clients now. Paper 1099-DAs are going away. Digital delivery is coming. And if clients don't download their forms, they won't have the data they need to file accurately.