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The Coin Rise 2025-01-01 10:30:34

IRS Grants Temporary Relief on Crypto Accounting Rules Amid Industry Pushback

IRS Grants Temporary Relief on Crypto Accounting Rules Amid Industry Pushback

The United States Internal Revenue Service (IRS) has announced temporary relief on a controversial rule affecting crypto investors on centralized exchanges (CeFi). The initial ruling required brokers to default to the “First In, First Out” (FIFO) accounting method if investors didn’t specify a preferred option such as HIFO (Highest In, First Out) or Spec ID. CeFi Brokers Get a Breather on FIFO Rule FIFO calculates capital gains by assuming the oldest assets purchased are sold first. While this method is straightforward, it often leads to higher tax liabilities, particularly in bull markets where early-bought assets have significantly appreciated. Cointracker’s head of tax, Shehan Chandrasekera, noted the potential fallout of imposing this rule prematurely. He explained that investors might unknowingly sell their lowest-cost-basis assets first, maximizing taxable gains. “You won’t have to be locked into FIFO as before,” Chandrasekera noted in a Dec. 31 X post, applauding the IRS’s decision to postpone the rule. The temporary relief extends until Dec. 31, 2025, granting brokers more time to implement systems accommodating various accounting methods. Until then, crypto taxpayers are encouraged to maintain their own records for accurate reporting. IRS Faces Legal Battle Over Reporting Rules This update follows a lawsuit filed on December 28 by the Blockchain Association and the Texas Blockchain Council against the IRS. The plaintiffs argue that new reporting rules requiring brokers to disclose digital asset transactions and expanding these obligations to include decentralized exchanges (DEXs) infringe on constitutional rights. The contested rules, slated to take effect in 2027, will compel brokers to report taxpayers’ transaction details and gross proceeds from digital asset sales. Critics claim these requirements place undue burdens on platforms and investors alike, potentially stifling innovation within the crypto industry. Crypto commentator Mark Thomas offered a nuanced view of the postponed rule. He noted that FIFO might occasionally benefit taxpayers, particularly when early-held assets qualify for long-term capital gains treatment. However, such cases are exceptions rather than the norm. Time for Compliance and Reform With the temporary relief, crypto brokers have a two-year window to adapt their systems, while taxpayers gain more time to navigate their accounting options. The broader implications of these IRS rules remain a contentious issue, with industry stakeholders pushing for fairer and more transparent regulations. As the 2027 deadline approaches, the crypto industry will likely see heightened advocacy for reforms that balance innovation with regulatory compliance. The post IRS Grants Temporary Relief on Crypto Accounting Rules Amid Industry Pushback appeared first on TheCoinrise.com .

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