The United States Internal Revenue Service has granted temporary relief for crypto asset holders by delaying the implementation of the FIFO accounting rule.
FIFO Rule Postponement
The initial IRS ruling stated that if investors on centralized exchanges don't choose their accounting method, brokers will default to FIFO. FIFO assumes the oldest purchased cryptocurrencies are sold first, potentially raising a taxpayer’s capital gains. Cointracker’s head of tax, Shehan Chandrasekera, warned that immediate implementation could have been 'disastrous' for many taxpayers.
Implications for Taxpayers
The temporary relief applies until December 31, 2025, giving brokers time to support all accounting methods. Taxpayers can maintain their own records until this date. Expert Mark Thomas noted that FIFO can be beneficial when the sale date is more than a year after the earliest purchase date.
Legal Actions Against IRS
The postponement came just days after the Blockchain Association and the Texas Blockchain Council filed a lawsuit against the IRS, arguing that the rules for reporting digital asset transactions are unconstitutional.
The postponement of the FIFO rule provides temporary relief for cryptocurrency holders regarding tax liabilities. Brokers are expected to offer various accounting methods by the deadline in 2025.
