IRS Proposes Digital-Only Crypto Tax Forms: No Paper 1099-DA

The IRS just proposed eliminating paper crypto tax forms. Form 1099-DA — the new standardized form for reporting digital asset transactions — would be delivered electronically only, with no paper alternative.

And here's the part that matters: if you refuse to consent to electronic delivery, exchanges like Coinbase and Kraken could terminate your account.

The proposal was published March 5, 2026, under reference number REG-105064-25. Public comment period is open now before any final approval.

What the Proposal Actually Says

If finalized, crypto brokers could require customers to accept electronic delivery of Form 1099-DA as the only option. No paper alternative. No opt-out.

Customers who refuse consent could have their accounts closed.

That's sharper than most regulatory proposals that shift to electronic delivery. Usually, holdouts can stay on paper at higher cost or administrative burden. This one gives brokers the option to end the relationship entirely with non-consenting customers.

Why the IRS Is Doing This Now

Form 1099-DA is being phased in starting with the 2025 tax year. Two deadlines are already in effect:

• Brokers must provide 2025 Form 1099-DA to customers by March 17, 2026

• Brokers must e-file those same forms with the IRS by March 31, 2026

The new form requires brokers to report total transaction gains and cost basis directly to the IRS, standardizing crypto tax reporting the same way stock brokers have reported equity transactions for decades.

What This Means for Crypto Users

For most active crypto traders who already manage accounts digitally, mandatory electronic delivery changes nothing. The form arrives in an inbox instead of a mailbox.

But edge cases exist. Users who intentionally maintained crypto accounts without linking email addresses, or who have privacy concerns about electronic document trails, now face a choice: consent to electronic delivery or lose exchange access entirely.

What This Means for CPAs

The broader implication is directional: the IRS is treating crypto exchanges identically to traditional brokers for reporting purposes.

For tax practitioners, this means:

1. Your crypto clients will get 1099-DAs. Expect them starting this filing season for 2025 transactions.

2. Reconciliation matters. The IRS has the same data you do. Mismatches will trigger notices.

3. Cost basis tracking is mandatory. Brokers are reporting it now. No more handwaving on crypto gains.

The Transition Period Matters

The IRS has signaled it won't impose penalties for "good faith" reporting errors during this 2026 transitional period. That's an acknowledgment of the technological growing pains both brokers and taxpayers are facing.

But that grace period won't last forever. By 2027, expect full enforcement.

If you have crypto clients, now is the time to get their reporting cleaned up. The infrastructure is being built. The forms are being standardized. The automated matching is coming online.

Paper forms were the last holdout. Once those go away, crypto tax compliance looks exactly like equity tax compliance. And the IRS knows exactly what you're trading.