IRS Postpones New Crypto Tax Reporting Rules
The US Internal Revenue Service (IRS) issued temporary transition relief on Wednesday, postponing new crypto tax reporting requirements.
The delay until the start of 2026, would give time for brokers to adapt to the new regulations, which would determine the cost basis for cryptos on centralized platforms.
CoinTracker Head of Tax Shehan Chandrasekera called the delay “good news for crypto holders interacting with CeFi exchanges in 2025.”
Further, the temporary transition relief only applies to sales occurring inside CeFi exchanges between 1/1/25 and 12/31/25.
“After 12/31/25, you must pick an accounting method for CeFi assets with the broker,” Shehan wrote on X. He also advocated to pick accounting method at CeFi exchange on 1/1/26 and matching the CeFi broker accounting method to crypto tax software tool.
4/ This temporary relief only applies to sales occurring inside CeFi exchanges between 1/1/25 and 12/31/25.
After 12/31/25, you must pick an accounting method for CeFi assets with the broker. By this time, I believe many brokers will support all accounting methods.
So, make…
— Shehan (@TheCryptoCPA) December 31, 2024
In July 2024, the IRS finalised custodial broker (CeFi broker) regulations for determining which crypto units are sold when investors hold multiple units in centralized exchange.
The mandate was initially set to go into effect on Jan. 1, 2025. Under the rule, if a taxpayer has not identified a preferred accounting method, the broker will sell assets under the First-In, First-Out (FIFO).
“Now, there was a practical problem with this approach,” Shehan added. “Almost all CeFi brokers were not ready to support Spec ID as of 1/1/25.” The specific identification method (Spec ID) allows users to choose which cryptocurrency units they are disposing of.
However, the problem with this approach would have left crypto investors with no option but to sell assets under FIFO.
“In a bull market environment, this could have been disastrous for many taxpayers,” the tax expert added.
The new crypto tax reporting delay gives a one-year grace time for brokers to develop support for other accounting methods.
Meanwhile, the Blockchain Association, in collaboration with the Texas Blockchain Council, has sued IRS over its latest cryptocurrency regulations.
The legal battle announced on December 28, pushed back against the IRS’ new rules mandating brokers to report crypto transactions.
Source: cryptonews.com
