IRS delays crypto tax reporting requirements until 2026

Here are more detailed insights into the IRS’s delay of the cryptocurrency tax reporting requirements until 2026:

• Regulatory Background: The delay stems from the need to finalize rules set forth by the Infrastructure Investment and Jobs Act, which expanded tax reporting obligations for cryptocurrency transactions. These obligations include reporting gross proceeds from digital asset sales in 2025, with reporting to begin in 2026, and basis information for certain digital assets starting in 2027 for sales in 2026.
• Impact on Brokers: Centralized cryptocurrency exchanges, or “brokers,” were initially tasked with using the First-In, First-Out (FIFO) method to calculate capital gains if investors didn’t specify an alternative method. The delay grants these platforms additional time to develop systems that support more accounting methods like Specific Identification, which could be more beneficial for taxpayers.
• Investor Implications: For investors, this delay means they aren’t immediately forced into the FIFO method, which might have increased their tax liability due to selling assets purchased at lower prices first. This provides a grace period for investors to plan their tax strategies more effectively.
• Legal Challenges: The decision comes amidst legal challenges against the IRS’s broader regulatory approach to cryptocurrencies, including pushback from industry groups like the Blockchain Association and the Texas Blockchain Council, who are contesting the scope and specifics of these reporting requirements.
• Temporary Relief: This delay is part of a broader IRS strategy to provide transitional relief, acknowledging the complexities involved in implementing new reporting standards for an asset class as dynamic as digital assets.
• Public and Industry Reaction: The crypto community has largely welcomed this delay, seeing it as a recognition of the practical difficulties in immediately adapting to new tax rules. There is sentiment on platforms like X (formerly Twitter) about the positive aspect of this delay for crypto holders, especially those interacting with centralized exchanges.

This delay signifies the IRS’s acknowledgment of the need for regulatory adaptability in the fast-evolving crypto market, providing both the industry and investors with more time to prepare for compliance with these new tax obligations.