IRS Proposes New Rules for Digital Asset Tax Reporting

The U.S. Internal Revenue Service (IRS) has proposed new regulations allowing cryptocurrency exchanges to require customers to receive tax forms electronically, such as the 1099-DA form for reporting total gains from digital asset transactions. According to ChainCatcher, exchanges previously had to offer paper form options. Under the new tax reporting system implemented this year, cryptocurrency exchanges must report total transaction gains and cost basis, enabling the IRS to automatically obtain detailed profit and loss data. This move aims to enhance compliance oversight of digital asset holders. The proposed regulations also permit exchanges to terminate business relationships with customers who refuse electronic receipt of tax forms. The proposal is not yet finalized and is currently open for public comment. Reports from crypto tax software platforms indicate a significant increase in IRS warning letters to U.S. users, reminding them that cryptocurrency transactions may be taxable and must be reported according to regulations.