The US Internal Revenue Service (IRS) has introduced a temporary relief measure to help cryptocurrency holders using centralized finance (CeFi) brokers navigate the upcoming changes in tax regulations. The relief aims to mitigate complications caused by Section 6045 custodial broker regulations, which take effect on January 1, 2025.
These regulations require CeFi brokers to report cryptocurrency transactions and apply specific accounting methods for asset sales. If taxpayers do not choose a preferred method, such as Highest In, First Out (HIFO) or Specific Identification (Spec ID), the brokers will default to First In, First Out (FIFO). This default method can increase tax liabilities, particularly in a bullish market.
The IRS has issued Notice 2025-7, which provides temporary relief for cryptocurrency sales conducted on CeFi exchanges between January 1 and December 31, 2025. The relief allows taxpayers to bypass the default FIFO method by using their own records or crypto tax software to specify which assets are being sold.
Taxpayers are urged to maintain detailed records or use reputable crypto tax software to ensure accurate reporting and alignment with their chosen accounting methods. The IRS has clarified that this relief is automatic and requires no immediate action from taxpayers, but starting January 1, 2026, CeFi users must select an accounting method with their brokers to avoid defaulting to FIFO.
As the implementation of these regulations continues to be debated, it’s essential for cryptocurrency holders to plan ahead and verify that their broker’s accounting methods match their tax software to prevent discrepancies.
Source: https://cryptopotato.com/irs-issues-new-notice-that-eases-burden-for-cefi-crypto-investors