The post IRS Delays Crypto Tax Reporting Rules, Eases Burden On Investors appeared on BitcoinEthereumNews.com.

The IRS has delayed implementing new crypto tax reporting rules to December 31, granting centralized exchanges time to adapt to new regulations, and potentially avoiding increased tax liabilities for digital asset investors.  The new reporting rules would have mandated centralized cryptocurrency exchanges to default to the First In, First Out (FIFO) accounting methods to calculate capital gains.  IRS Grants Relief  The US Internal Revenue Service (IRS) announced on Wednesday it was delaying the implementation of new tax reporting requirements for cryptocurrencies until December 31, 2025. The delay gives brokers and centralized exchanges time to adapt to the regulations. The decision averts increased tax liabilities for digital asset investors and reflects the complexities of taxation in crypto and the need for regulatory adaptability. The IRS and Treasury Department had published new rules to determine which units are sold when investors hold multiple units in a brokerage account or centralized exchange.  The new rules made it mandatory for centralized crypto exchanges to switch to the First In, First Out method (FIFO) accounting method for capital gains calculations. FIFO assumes the earliest acquired crypto is sold first, resulting in higher taxable gains. Shehan Chandrasekara, Head of Tax at CoinTracker, elaborated on the problem with this approach on X, stating,  “Now, there was a practical problem with this approach. Almost all CeFi brokers were not ready to support Spec ID as of 1/1/25. This meant you had no option other than selling your CeFi assets under FIFO starting 1/1/25. In a bull market environment, this could have been disastrous for many taxpayers because you’d be unintentionally selling the earliest purchased asset (which tends to have the lowest cost basis) first while unknowingly maximizing your capital gains.” Investor Concerns Investors were worried about potentially inflated tax bills as FIFO could have forced the sale of…

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Filed under: News - @ January 3, 2025 5:11 am