IRS Delays New Crypto Tax Reporting Rules Until 2026

The US Internal Revenue Service (IRS) announced a one-year delay in the implementation of new tax reporting requirements for cryptocurrencies. It is now set to take effect on 1 January 2026.

The postponement gives brokers more time to adapt to the regulations, which focus on determining the cost basis of cryptocurrencies on centralized platforms, according to an official announcement.

Initially finalized in July 2024 by the IRS and Treasury Department, the rules aim to standardize how cryptocurrency sales are reported.

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Early Crypto Purchases Could Mean Higher Taxes

If investors do not select a specific accounting method, the First-In, First-Out (FIFO) approach will automatically apply. The method considers the earliest acquired crypto assets as sold first. It can have significant tax implications, especially in a rising market.

Shehan Chandrasekera, Head of Tax Strategy at CoinTracker, pointed out practical challenges with the FIFO mandate. Most centralized finance (CeFi) brokers lack systems to support specific identification accounting, where users choose which cryptocurrency units to sell.

Without this capability, crypto investors would be forced to follow the FIFO rule. Which means, they could potentially incur higher capital gains taxes by unintentionally selling assets with the lowest cost basis.

Chandrasekera described this scenario as “disastrous,” especially in a bullish market environment. He said it would maximize tax liabilities for many investors.

3/ IRS recognized this issue and issued temporary transition relief (Notice 2025-7), today. 👏

This means, If you sell assets inside a CeFi broker, you can still use your books & records/crypto tax software to document which specific unit you are selling.

You won't have to be…

— Shehan (@TheCryptoCPA) December 31, 2024

The IRS’s decision to delay implementation offers temporary relief. It allows brokers to enhance their platforms to support alternative accounting methods before the 2026 deadline.

Meanwhile, the Blockchain Association, DeFi Education Fund, and Texas Blockchain Council have filed a lawsuit against the IRS, challenging another rule requiring brokers to store and report users’ personal information and trading histories starting in 2027.

The groups argue that these requirements, which extend to decentralized exchanges (DEXs), are unconstitutional.

Under the contested rules, brokers would be obligated to report taxpayer identities and gross proceeds from digital asset transactions. Critics contend that this measure infringes on user privacy and could have far-reaching implications for the crypto industry.

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IRS Reaffirms Staking Rewards Are Taxable

Last month, the IRS reiterated its stance that staking rewards are taxable income upon receipt, rejecting claims that they should be treated as new property and taxed only upon sale.

The clarification came amidst a legal challenge from Joshua and Jessica Jarrett, who argue that staking rewards should not be taxed until they are sold or exchanged.

At the time, the IRS denied the Jarretts’ assertions. The IRS claimed that staking rewards must be reported as income based on their fair market value at the time the taxpayer gains the ability to sell or otherwise dispose of them.

The agency cited Revenue Ruling 2023-14 as the foundation for its position. “Revenue Ruling 2023-14 requires taxpayers who receive staking rewards to report the rewards as income at their fair market value,” the IRS said.

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Disclaimer

Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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