IRS and Crypto: Navigating the Extended Deadline and Tax Implications for 2026
by aria-crypto.com
January 2, 2025 at 10:13
IRS and Crypto: Navigating the Extended Deadline and Tax Implications for 2026
The US Internal Revenue Service (IRS) has announced a delay in the implementation of new cryptocurrency tax reporting requirements until January 1, 2026. Initially set in motion in July 2024, these regulations require brokers to determine the cost basis of cryptocurrencies on centralized platforms using specific accounting methods. The delay, attributed to feedback from industry stakeholders, offers brokers additional time to adjust and integrate the necessary systems to comply with these requirements. Particularly impactful is the First-In, First-Out (FIFO) method, which the IRS will automatically apply if no specific accounting method is chosen by the investor. This decision could lead to higher capital gains taxes for many, as FIFO considers the earliest acquired assets as sold first, potentially maximizing tax liabilities in a bullish market. The IRS has provided temporary relief, allowing the use of existing financial records or crypto tax software until the new deadline to document specific units sold on centralized finance (CeFi) platforms. However, this postponement aligns with ongoing legal battles, including a lawsuit by the Blockchain Association and other groups, challenging additional IRS rules set to take effect in 2027 that require brokers to report personal user information and trading data. These groups argue that such mandates infringe on privacy and overreach regulatory powers, setting the stage for a contentious intersection of finance, technology, and law in the crypto industry.
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