Happy New Year from Bitwave!
As we head into 2025, we wanted to share an important, last-minute regulatory update for digital asset brokers and their customers.
Today, the IRS released additional guidance expanding on Revenue Procedure 2024-28. This new notice provides temporary relief for brokers and taxpayers in the face of technical challenges ahead of the January 1, 2025, compliance deadline.
Here's what this means for you.
Key Updates from the IRS
Temporary Relief for Brokers:
- Brokers are required under the new Rev. Proc. to accept specific instructions or standing orders from customers on which digital asset lots to dispose of. However, some brokers lack the technical capabilities to operate under these instructions.
- As a result, brokers will default to using the First-In, First-Out (FIFO) method for calculating gains and losses on IRS 1099 forms.
Taxpayer-Specific Relief for 2025:
- As an acknowledgement of these limitations, taxpayers can document and apply their own specific identification or standing order methodologies as an alternative to the FIFO-based calculations provided by brokers.
- This temporary relief period will be active from January 1 through December 31, 2025,
- To do this, taxpayers must maintain accurate records of their chosen methodology to ensure compliance with IRS requirements.
Safe Harbor Flexibility:
- Taxpayers relying on the Safe Harbor provisions under Revenue Procedure 2024-28 can still apply the temporary relief during 2025, provided the requirements for the Safe Harbor are met.
This latest update reflects the IRS's recognition of current gaps in broker systems while placing responsibility on taxpayers to manage their compliance effectively.
How Bitwave Supports You
Our platform is designed to give you full control over your digital asset tracking and reporting, ensuring you can stay compliant – today and tomorrow.
- Override FIFO with Specific Identification: Document and implement your own specific identification or standing order methodology, bypassing the default FIFO-based calculations on your broker’s 1099.
- Compliance-Ready Basis Tracking: Ensure alignment with the IRS’s requirements for both temporary relief and Safe Harbor provisions.
- Comprehensive Digital Asset Reporting: Generate audit-ready reports that reflect your chosen methodology and keep detailed records for compliance.
Next Steps
- Understand the Guidance: Determine how this temporary relief applies to your digital asset strategy.
- Document Your Methodology: Use Bitwave to track and document your chosen specific identification or standing order methods for 2025.
- Contact Us for Support: Our team is here to assist with configuring your workflows and ensuring your compliance strategy is optimized. Reach us at info@bitwave.io.
At Bitwave, we simplify compliance so you can focus on growing your business.
Happy New Year!
Disclaimer: The information provided in this blog post is for general informational purposes only and should not be construed as tax, accounting, or financial advice. The content is not intended to address the specific needs of any individual or organization, and readers are encouraged to consult with a qualified tax, accounting, or financial professional before making any decisions based on the information provided. The author and the publisher of this blog post disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use or application of any of the contents herein.
