2025 Crypto Tax Guide: IRS Changes & What They Mean for You
As crypto trading grows, the IRS is refining how it wants taxpayers to track and report digital asset transactions. New transitional relief for the 2025 tax year and finalized regulations from mid-2024 have granted some clarity on cost-basis identification. Below, we unpack these changes, correct some common misconceptions, and show how Integral can help you remain compliant and strategic.
Potential IRS Changes on the Horizon
New Year’s Eve Notice: A One-Year “Transitional” Relief
On December 31, 2024, the IRS issued a notice granting temporary relief regarding “cost-basis identification” for digital asset held in the custody of a broker. Under final regulations published in July 2024, taxpayers were initially required to notify their brokers which specific units they were selling at or before each transaction—or default to First In, First Out (FIFO). But since most brokers aren’t yet equipped to handle these instructions, the IRS has offered transitional relief for 2025.
What’s Changing for 2025?
Broker-based reporting of specific unit identification is postponed for now, but taxpayers should be prepared for stricter rules once the transitional period ends.
Taxpayers may use a single cost-basis method (e.g., FIFO or Specific Identification) across their entire portfolio without giving transaction instructions to the broker.
During the transition period, taxpayers must keep their own internal records to document which method they use for each transaction.
After the transition period, taxpayers will need to specify the lot they are going to sell, at the time of the sale, to their brokers, but may use standing orders.
Broker Reporting (Form 1099-DA)
The IRS has released a final version of the new Form 1099-DA—through which U.S. exchanges and brokers will eventually report digital asset sales or exchanges to the IRS. Similar to Form 1099-B for securities, these filings will detail proceeds, wallet addresses, and eventually cost-basis. Taxpayers will begin receiving these Forms 1099-DA from digital asset brokers beginning in 2026, for transactions that take place in 2025.
Effective Dates: Some aspects of broker reporting begin in 2025 (with first issuances of Form 1099-DA in early 2026)End of “Universal Basis” Approach
Many crypto holders previously used an “universal basis” approach, where they considered all tokens of the same type as interchangeable across wallets or accounts. Starting January 1, 2025, taxpayers must track the basis of a token by wallet or account. Additionally, the rules require taxpayers to pick a cost-basis method (FIFO or specific identification) in real time or at least on a consistent annual basis—reducing the flexibility to retroactively shift units.
Why These Regulations Are Impactful
More Detailed Reporting
Now that the Form 1099-DA is finalized, the IRS may receive in-depth data on sales and exchanges, allowing the agency to cross-check that information against each taxpayer’s return.Enforcement on Cost-Basis Methods
Even with transitional relief, the IRS has increased its scrutiny of cryptocurrency regarding consistent cost-basis usage. If audited, failure to maintain proper records or switching methods transaction-by-transaction (unless properly documented) could increase your risk that the IRS challenges the basis reported on your tax return.Complex Tax Returns
Crypto tax returns can be intricate, especially for those using multiple blockchains, NFT platforms, and or DeFi protocols. The new identification rules add another layer of compliance.Higher Audit Risk
The IRS continues to hone in on unreported crypto income. Standardized forms, like Form 1099-DA and thorough cost-basis requirements will help the IRS identify inconsistencies.
“There’s a lot of uncertainty and confusion about the new regulations and the constantly shifting timelines,” says Walter Zinenko, a senior manager in EisnerAmper’s Blockchain and Digital Asset group. ”Even sophisticated taxpayers will need assistance with navigating these changes.”
How to Prepare Your Crypto Accounting
Understand the Transitional Relief
For tax year 2025, you’re not required to supply cost-basis instructions (e.g., specifying which units you are selling) to your broker for each transaction. Instead, you may choose one cost-basis method for the whole year.
However, you must:
Stay consistent: You cannot assign different cost-basis methods to different trades after the fact to minimize tax.
Maintain thorough internal records: If audited, you should be able to show exactly which method you used—FIFO or specifc-ID—and how you applied it consistently.
Keep Solid Documentation
Even under transitional relief, the onus is on you to keep accurate, ongoing records of acquisitions, sales, cost basis, and transaction dates. If the IRS requests your documentation, having a well-organized ledger is crucial.
Evaluate Your Cost-Basis Method
The IRS does not require everyone to use FIFO. Methods like LIFO or HIFO are valid if you document them properly and apply them consistently. Ask a tax professional which method might fit your portfolio best.
Consider Wallet Consolidation
Minimizing the number of wallets and delineating “trading” vs. “long-term hold” accounts can simplify your cost-basis calculations.
Plan Beyond 2025
Transitional relief is temporary. If or when full identification requirements begin, you may need to give your broker cost-basis instructions in real time. Now is an ideal time to build robust systems to handle such a shift.
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How Integral Simplifies Your Compliance
Regardless of whether the IRS fully implements the broker reporting rules in 2025 or beyond, Integral helps streamline crypto accounting with clarity, automation, and real-time visibility:
Centralized Ledger
We automatically pull transactions from exchanges, wallets, and multisig safes into a single, easy-to-navigate ledger.Flexible Cost-Basis Options
Integral supports FIFO. Configure whichever approach you prefer (or your tax advisor recommends), and we’ll maintain consistency in your books.Wide-Ranging Integrations
Our connections with major blockchains and ERPs allow you to merge crypto and fiat data seamlessly—no more spreadsheet chaos.Automated Bookkeeping & Spam Filters
Cut down on data-entry headaches. Our rules engine classifies over 90% of transactions automatically, filtering out spam and duplicates.Real-Time Treasury Visibility
Access an instant snapshot of your holdings, across chains and accounts, in a single dashboard—supporting better financial decisions.Audit-Ready Records
We prioritize compliance. Generate GAAP/IFRS-compatible statements and keep detailed transaction histories suitable for IRS or investor scrutiny.
Future-Proof Your Crypto Compliance
The IRS is steadily expanding crypto oversight. While 2025 offers a transitional reprieve from real-time cost-basis instructions, the requirement for thorough and consistent bookkeeping remains. Adopting a robust system now will help ensure that you’re ready if the IRS fully mandates on-the-spot identification or if Form 1099-DA reporting becomes widespread.
Integral is here to help with automated cost-basis tracking, real-time insights, and comprehensive audit trails. Over 150 pioneering teams already rely on our platform to handle complexity and stay at the forefront of compliance.
