The Internal Revenue Service (IRS) has announced a temporary relief measure aimed at benefiting cryptocurrency users who rely on centralized finance (CeFi) exchanges. Shehan Chandrasekera, CoinTracker’s Head of Tax Strategy, shared the news on the social media platform X, saying, “The IRS has issued a temporary relief notice that’s great news for crypto holders interacting with CeFi exchanges in 2025!”
The relief addresses concerns tied to the finalized Section 6045 custodial broker regulations, which will take effect on January 1, 2025. These regulations mandate the use of FIFO (First-In, First-Out) accounting for digital assets unless an alternative method like HIFO (Highest-In, First-Out) or Specific Identification (Spec ID) is selected. Chandrasekera noted a major challenge: “As of January 1, 2025, nearly all CeFi brokers were unprepared to support Spec ID.” Without this option, many crypto investors would have defaulted to FIFO, potentially leading to higher taxes on asset sales.
IRS Crypto Relief: Flexibility in Identifying Sold Assets
The IRS’ temporary relief permits taxpayers to continue using personal records or tax software to specify which cryptocurrency units are being sold. Shehan Chandrasekera explained, “This means that if you sell assets through a CeFi broker, you can still rely on your own records or crypto tax software to document the specific units sold.”
This relief applies solely to CeFi transactions occurring between January 1, 2025, and December 31, 2025. After this period, taxpayers must formally choose an accounting method with their broker. Chandrasekera emphasized the importance of this step, advising:
“Be sure to select your accounting method with your CeFi exchange on January 1, 2026. If you don’t make a choice, you’ll likely default to FIFO.”
Aligning Tax Software with Broker Settings Under IRS Relief
Chandrasekera stressed the importance of ensuring that tax software aligns with the accounting method selected by the CeFi broker. “Ensure the accounting method used by your CeFi broker matches your crypto tax software so your tax lots remain in sync,” he advised.
He also clarified that no immediate action is required to benefit from this relief. “To be clear, you don’t need to file anything with the IRS right now to qualify for this relief. It’s automatically applied to you,” Chandrasekera assured taxpayers.
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