US Internal Revenue Service (IRS) announced on Wednesday that it is delaying new cryptocurrency-related tax reporting requirements until 2026. The postponement decision will allow intermediaries engaged in cryptocurrency trading to comply with new regulations on determining the cost basis for transactions made on central platforms.
New Regulations in Taxation of Cryptocurrencies
IRS in July and US Treasury Departmenthas published new rules on how to determine which cryptocurrencies are sold when investors hold multiple cryptocurrencies in a brokerage firm, such as a centralized exchange. According to these rules, if the taxpayer has not specified an accounting method, preferably First Bought, First Sold (FIFO) method will be applied. That is, the earliest acquired cryptocurrencies will be considered sold first.
This regulation was expected to come into force on January 1, 2025. However, the IRS delayed it for a year so brokers could make the necessary changes. This regulation will now be valid on January 1, 2026.
Challenges for Cryptocurrency Investors
CoinTracker Tax Manager Shehan ChandrasekeraIn his statement, he stated that centralized finance (CeFi) platforms are having difficulty adapting to the specific identification method that will allow users to choose which cryptocurrencies to sell. This would force investors to use the FIFO method, which could cause “disaster” in the current bull market, according to Chandrasekera.
The FIFO method can lead investors to sell assets where they have high returns, as the earliest cryptocurrencies are generally purchased at a lower cost. This can increase capital gains.
On the other hand Blockchain Association, DeFi Education Fund And Texas Blockchain Council He filed a lawsuit against another rule by the IRS that requires some DeFi brokers to store and report users’ personal information and transaction history through 2027. The lawsuit aims to address the problems that regulation will bring.
Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that crypto currencies carry high volatility and therefore risk, and should carry out their transactions in line with their own research.
