Several days ago, the US Internal Revenue Service (IRS) issued a statement providing temporary relief on crypto cost-basis reporting rules. While a good thing for digital asset investors, the change is only until December 31, 2025.
There has been much jostling between policymakers as to how digital assets should be handled in regard to taxes. There remain challenges regarding reporting requirements.
Brett Cotler, a partner at Seward & Kissel LLP, is an attorney who advises clients on federal income taxes and shared some feedback on the IRS statement. Cotler stated:
“This relief will be helpful for investors that hold crypto on an exchange or another platform that is subject to 1099 reporting. Without this relief, those taxpayers could be subject to the default FIFO rules unless the brokers allow for specific identification. For 2025, the specific identification can occur on the taxpayer’s own books and records (similar to self-hosted wallets). Zooming out, this also gives the industry a little breathing room to see if the incoming Trump administration will look at the 1099-DA reporting rules. It is possible that the crypto-friendly campaign rhetoric could turn into less burdensome tax reporting for brokers and for investors.”
Congress has sought to enact legislation that would help provide greater clarity for the digital asset sector. Unfortunately, legislation with updated rules has consistently been shot down by Democrats who have controlled the Senate. With both the House and the Senate being controlled by Republicans following the last election and a Fintech-receptive Administration forthcoming with the election of Donald Trump for President, there is a good chance that new rules will emerge that will provide clear-cut regulation for the digital asset sector, including taxes.
Update: Jessalyn Dean, VP of Tax Information Reporting at Ledgible, has shared a comment on the IRS statement. She notes that the IRS has not delayed the implementation of the 2025 tax year Form 1099-DA reporting for Digital Asset brokers that went into effect yesterday. Dean states:
“Sales/exchanges of digital assets on centralized exchanges occurring in 2025 will be reportable by brokers on a Form 1099-DA in Q1 2026, gross proceeds reporting only. The IRS has not changed this date. Notice 2025-07 released this week was addressed to taxpayers, not brokers. The Notice does not give brokers more time to do anything (a “delay in implementation”).”
Adding:
“Notice 2025-7 from the IRS released last week, provides relief to CeFi exchanges to allow individual taxpayers to select specific accounting methods for their sales, initially supposed to take effect on 1/1/2025. Essentially, if you sell crypto on a CeFi exchange in 2025, you can now still use your own records still to use other accounting methods, such as HIFO, or LIFO, rather than being stuck with FIFO accounting. The temporary relief delays the need for CeFi exchanges to have this functionality in their reporting until 2026.
What this relief did not do is eliminate the requirement for broker tax reporting for digital assets, like many publications have been incorrectly reporting. Nor does the Notice delay the rule that you must do tax lot relief on a wallet-by-wallet basis.”