IRS Introduces Temporary Relief for CeFi Exchange Users

According to Odaily, the United States Internal Revenue Service (IRS) has announced a temporary relief measure expected to benefit CeFi exchange users in 2025. This measure addresses concerns arising from the final version of Section 6045's broker regulations, set to take effect on January 1, 2025. These regulations require the use of the first-in, first-out (FIFO) accounting method for digital assets unless a preferred method like highest-in, first-out (HIFO) or Specific Identification (Spec ID) is chosen. Shehan Chandrasekera, Head of Tax Strategy at Cointracker, explained the issue, noting that as of January 1, 2025, nearly all CeFi brokers are unprepared to support Spec ID. This lack of readiness could force many cryptocurrency holders to default to FIFO accounting, potentially leading to higher tax liabilities during asset sales. Chandrasekera described the situation as potentially disastrous for many taxpayers in a bull market, as they might inadvertently sell their earliest purchased assets, which often have the lowest cost basis, thereby maximizing capital gains unintentionally. The IRS's temporary relief allows taxpayers to continue using their records or tax software to identify specific units being sold. This relief period applies only to CeFi transactions from January 1, 2025, to December 31, 2025. After this date, taxpayers will need to formally select an accounting method with their brokers. Chandrasekera also emphasized the importance of synchronizing tax software with broker settings.