The Internal Revenue Service (IRS) announced the launch of a temporary relief program for crypto holders using centralized exchanges, allowing them to avoid forced FIFO sales in 2025.
IRS Relief Program
The program will run from January 1, 2025, to December 31, 2025, allowing holders to use their records or crypto tax software tools to specify which units they are selling instead of being locked into First-In, First-Out (FIFO).
Rationale and Program Details
The IRS instituted custodial broker regulations effective at the start of 2025, under Section 6045, requiring users to specify their preferred accounting method like Specific Identification (Spec ID) or Highest-In, First-Out (HIFO). Otherwise, assets will be sold through FIFO. However, most exchanges may not support Spec ID, forcing some users to sell using FIFO, which can lead to higher tax liabilities.
Expectations Post-2025 and Expert Opinion
The IRS expects exchanges to support necessary accounting by 2026. After December 31, 2025, users must choose their accounting method or default to FIFO. Forbes crypto tax analyst Shehan Chandrasekera emphasized selecting an accounting method to avoid default FIFO.
The IRS temporary relief program offers crypto holders flexibility to manage tax obligations in 2025. Subsequently, exchanges are expected to support various accounting methods for tax efficiency.
