New IRS rules could have been “disastrous” for crypto taxpayers during the bull market, a crypto tax executive said.
The United States Internal Revenue Service (IRS) has issued a temporary relief for a rule that would have defaulted crypto holders on centralized exchanges to a less-than-ideal accounting method.
The initial IRS ruling stated that if investors holding crypto assets with a CeFi broker don’t select their preferred accounting method, like HIFO (Highest In, First Out) or Spec ID, the broker will default to reporting sales using the FIFO method.
FIFO, otherwise known as “First In, First Out,” is the default method for calculating capital gains tax in the US. It is calculated by assuming the oldest cryptocurrency bought is sold first, pushing up a taxpayer’s capital gains.
