The United States Internal Revenue Service (IRS) released a temporary relief measure that is anticipated to benefit CeFi exchange users in 2025, as reported by Odaily.
This measure is intended to address the concerns that have been raised regarding the final version of Section 6045’s broker regulations, which are scheduled to be implemented on January 1, 2025. In the absence of a preferable method, such as highest-in, first-out (HIFO) or Specific Identification (Spec ID), these regulations necessitate the use of the first-in, first-out (FIFO) accounting method for digital assets.
Shehan Chandrasekera, Head of Tax Strategy at Cointracker, clarified the matter, stating that nearly all CeFi brokers are unprepared to support Spec ID as of January 1, 2025. This lack of preparedness could result in a significant number of cryptocurrency holders reverting to FIFO accounting, which could result in increased tax liabilities during asset sales. Chandrasekera characterized the situation as potentially catastrophic for numerous taxpayers during a bull market, as they may inadvertently dispose of their earliest-purchased assets, which frequently have the lowest cost basis, thereby unintentionally maximizing capital gains.
Taxpayers are permitted to continue employing their records or tax software to identify particular units that are being sold as a result of the IRS’s provisional relief. This respite period is exclusively applicable to CeFi transactions that occur between January 1, 2025, and December 31, 2025. Taxpayers will be required to formally select an accounting method with their brokers after this date. Chandrasekera also underscored the significance of synchronizing tax software with broker settings.
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