IRS Proposes Electronic Crypto Tax Forms: What About Staking Tax Issues?

The IRS and Treasury have proposed allowing digital asset brokers to deliver Form 1099‑DA exclusively via electronic means, eliminating paper options. This change aims to streamline reporting and enhance automated compliance. Yet, the proposal leaves unresolved questions about how staking rewards—taxable income under IRS rules—will be reported and tracked.

Proposal for Electronic-Only 1099‑DA Delivery

On March 5, 2026, the IRS and Department of the Treasury unveiled proposed regulations (IR‑2026‑29) that would permit brokers like Coinbase and Kraken to provide Form 1099‑DA solely through electronic delivery, without offering paper alternatives. The move is intended to reduce printing and mailing burdens and costs associated with high-volume crypto transactions. Brokers would no longer need affirmative opt-in for electronic delivery, provided they meet enhanced notice and accessibility standards.

Form 1099‑DA, introduced for the 2025 tax year, is designed to report digital asset transactions such as sales, exchanges, and payments in crypto, aligning crypto reporting with traditional financial instruments.

The Staking Tax Issue: What Remains Unresolved

IRS Position on Staking Rewards

Under Revenue Ruling 2023‑14, the IRS treats staking rewards as ordinary income at the moment a taxpayer gains “dominion and control” over the tokens—meaning when they can sell, transfer, or otherwise dispose of them. The fair market value at that moment becomes taxable income.

This position was reaffirmed in recent guidance: staking rewards are taxable upon receipt, even if locked or illiquid, and must be reported accordingly.

Reporting Forms and Gaps

Taxpayers must report staking income on Schedule 1 as “Other Income,” or on Schedule C if staking is conducted as a business.

Some exchanges issue Form 1099‑MISC for staking income over $600, but there is no minimum threshold—income must be reported even if no form is issued.

However, Notice 2024‑57 explicitly exempts staking transactions from Form 1099‑DA reporting until further guidance is issued. That means brokers are not required to report staking-related transactions on Form 1099‑DA, though the income remains taxable.

Practical Implications

• Taxpayers may not receive any IRS-issued form for staking income, especially if earned via self-custodied wallets or decentralized platforms.
• Without standardized documentation, individuals must rely on their own records or tax software to report staking income accurately.
• The absence of a 1099‑DA for staking does not relieve taxpayers of their obligation to report income. The IRS uses automated matching systems and may flag discrepancies.

Significance and Stakeholder Impact

For Taxpayers

• Simplified delivery of 1099‑DA may reduce paperwork burden.
• Staking income remains a blind spot: taxpayers must proactively track and report rewards even without broker documentation.
• Potential for confusion or error increases, especially for casual or retail stakers.

For Crypto Platforms

• Electronic-only delivery reduces logistical costs.
• Platforms must still navigate how to report staking rewards, especially under the current exemption from 1099‑DA reporting.
• Some may continue issuing 1099‑MISC for staking, but practices vary widely.

For the IRS

• The proposal enhances enforcement via automated matching of broker-submitted data.
• However, staking income remains harder to track due to lack of standardized reporting.
• The IRS may need further guidance or new forms to close this gap.

Analysis and Future Outlook

The IRS’s push for electronic-only delivery of Form 1099‑DA reflects a broader effort to modernize tax reporting for digital assets. It promises efficiency and cost savings. Yet, staking rewards remain a regulatory blind spot. Without inclusion in 1099‑DA, staking income relies on taxpayer diligence and self-reporting.

Possible future developments include:

• New reporting requirements for staking, potentially via a separate form or inclusion in 1099‑DA.
• Clarified guidance on how brokers should report staking rewards, especially for illiquid or locked assets.
• Enhanced IRS enforcement targeting unreported staking income, leveraging AI and data analytics.

The IRS Advisory Council has recommended clearer guidance on passive staking income, signaling recognition of the issue.

Conclusion

The IRS’s proposal to allow electronic-only delivery of Form 1099‑DA marks a significant step toward streamlined crypto tax reporting. However, the staking tax issue remains unresolved. Staking rewards are taxable upon receipt, yet are not currently reported via 1099‑DA. Taxpayers must navigate this complexity using Schedule 1 or Schedule C, backed by meticulous record-keeping.

Until the IRS issues further guidance or expands reporting requirements, staking income remains a self-reported obligation. The proposal improves efficiency—but staking tax clarity remains a work in progress.

Frequently Asked Questions

What is Form 1099‑DA and when will it be used?

Form 1099‑DA is a new IRS tax form for reporting digital asset transactions like sales and exchanges. It applies starting with the 2025 tax year, with brokers required to issue it in early 2026.

Will staking rewards be reported on Form 1099‑DA?

No. Notice 2024‑57 exempts staking transactions from 1099‑DA reporting until further guidance is issued. Staking income must still be reported by the taxpayer.

How should I report staking income on my tax return?

Report staking rewards as ordinary income on Schedule 1 . If staking is a business, use Schedule C. Include the fair market value at the time you gain control.

Do I need to report staking income even if I don’t receive a 1099?

Yes. The IRS requires reporting of staking income regardless of whether a form is issued. Failure to report can trigger penalties.

What is “dominion and control” in staking taxation?

It refers to the moment you can sell, transfer, or dispose of staking rewards. Taxable income is recognized at that point, not when rewards are generated.

Could the IRS require staking reporting in the future?

Yes. The IRS Advisory Council has recommended clearer guidance on passive staking income. Future regulations may require brokers to report staking rewards or introduce new forms.