**IRS Offers Temporary Crypto Tax Relief: What You Need to Know**

The United States Internal Revenue Service (IRS) has introduced a temporary relief measure for cryptocurrency holders using centralized exchanges in 2025, easing the tax burden and providing a welcome respite for investors.

**Understanding the Issue: Custodial Broker Regulations and FIFO Accounting**

The IRS’s custodial broker regulations, set to take effect on January 1, 2025, would have required the use of the First-In, First-Out (FIFO) accounting method for digital assets, potentially leading to unintentionally maximizing capital gains for taxpayers. This move was part of the IRS’s efforts to combat crypto tax evasion.

**Temporary Relief for Crypto Holders**

According to Shehan Chandrasekera, Head of Tax Strategy at Cointracker, the IRS has offered a temporary solution, allowing taxpayers to continue using their own records or crypto tax software to identify specific units being sold, rather than relying on the FIFO method. This relief applies to CeFi transactions between January 1, 2025, and December 31, 2025.

**Key Details and Next Steps**

* **Post-Relief Period:** After December 31, 2025, taxpayers must select an accounting method with their broker, or FIFO will be selected by default. * **New Crypto Tax Guidelines:** The IRS published new guidelines on December 27, requiring DeFi brokers to collect and report detailed customer and transaction information. * **Combatting Crypto Tax Evasion:** The IRS is developing an AI tool to assist in combating crypto tax evasion, emphasizing the importance of staying informed and compliant with tax regulations.

**Staying Ahead of Crypto Tax Regulations**

While this temporary relief measure provides a welcome respite for crypto holders, it’s essential to stay informed and compliant with tax regulations. As the IRS continues to crack down on crypto tax evasion, verify facts independently and consult with a professional before making any decisions.

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