The IRS has announced temporary relief regarding a new rule that could have negatively impacted crypto taxpayers by defaulting their accounting method to FIFO (First In, First Out) when they do not select a preferred method. This change means that if investors on centralized exchanges do not actively choose an accounting method, the IRS would assume their sales are calculated using FIFO, potentially resulting in higher capital gains taxes as the oldest assets—often bought at lower prices—would be considered sold first. Cointracker's Shehan Chandrasekera emphasized that immediate implementation of this rule could have been “disastrous” during a bull market, as investors might inadvertently maximize their capital gains by selling these older, lower-cost assets. Crypto commentator Mark Thomas highlighted that FIFO might only be beneficial if sales occur more than a year after the oldest purchased crypto but less than a year after the latest. This temporary relief allows crypto taxpayers to keep using their own records until December 31, 2025, while brokers prepare for the upcoming requirements requiring them to disclose transaction details starting in 2027, following a lawsuit against the IRS from the Blockchain Association and Texas Blockchain Council.

Source 🔗