As regulations on the taxation of cryptocurrency transactions expand in the US, a new regulatory proposal from the US Internal Revenue Service (IRS) has come to the fore.
The agency proposed a rule change that would allow cryptocurrency exchanges to only transmit tax forms to their customers electronically.
The Internal Revenue Service (IRS), an agency of the U.S. Treasury Department, announced today in a draft regulation that it plans to require crypto brokers to submit tax notices to their clients digitally. If the proposal is accepted, crypto platforms like Coinbase and Kraken may no longer be required to provide paper copies of tax documents sent to their customers.
The draft regulation was published under the title “Electronic Provision of Buyer Declarations Regarding Digital Asset Sales by Brokers.” According to this, digital asset brokers will be able to use an alternative approval mechanism to provide clients with electronic notifications containing transaction information reported to the IRS. This will allow users to receive electronic notifications without having to choose between paper and physical delivery.
According to the proposed rule, intermediaries will not be required to send paper documents if their customers refuse electronic delivery. The draft regulation also states that intermediaries may be given the option to terminate business relationships with customers who reject electronic delivery.
This regulatory proposal coincides with the implementation of the IRS’s new reporting system for tracking crypto transactions. Under the new rules, cryptocurrency brokers are required to report gross income and cost basis for digital asset sales to the IRS via Form 1099-DA. This will allow tax authorities direct access to users’ profit and loss information.
The IRS states that the regulation aims to improve tax compliance in cryptocurrency transactions and prevent underreporting. The draft rule has not yet gone into effect and is open to public comment.
*This is not investment advice.
