IRS Stuns with ‘Voluntary’ Taxes and Postponed Crypto Tax Rules to 2026

• The IRS delayed crypto tax reporting rules to January 2026, allowing brokers time to adapt, sparking mixed reactions in the industry.
• Brokers must adopt the FIFO method under new rules, potentially increasing tax burdens during bull markets and causing industry concern.

The Internal Revenue Service (IRS) has stirred conversation with its latest decisions. Crypto tax reporting rules, initially set to kick in by 2025, are now delayed until January 1, 2026. This decision grants brokers more breathing room to adapt and improve systems for tracking crypto transactions, but the move has sparked mixed reactions across the industry.

At the heart of the delay is the agency’s acknowledgment that the current state of crypto platforms is not up to par. Many brokers still struggle to track the cost basis of digital assets accurately, a crucial factor for correct tax reporting. By pushing back the start date, the IRS aims to ensure a smoother transition for both brokers and investors.

Meanwhile, the IRS caused ripples by calling the U.S. tax system “voluntary.” In a clear statement, the agency said, “Our US tax system is a voluntary tax system.” However, officials voiced concerns that without strict enforcement, there’s a risk of losing public compliance.

Brokers Brace for 2026 Crypto Tax Changes

Brokers will face new obligations when the new crypto tax rules finally take effect in 2026. They’ll need to adopt the First-In, First-Out (FIFO) method if the investor chooses no specific accounting method. This approach ensures the earliest acquired crypto assets are sold first, a system that can lead to higher capital gains.

The IRS also aims to protect user privacy by making key changes to Form 1099-DA. The form will no longer include wallet addresses or transaction IDs, enhancing taxpayer data security. By giving more time to both platforms and investors, the agency hopes to strengthen reporting practices while safeguarding sensitive information.

This move aligns with efforts to standardize rules for decentralized finance (DeFi) and centralized finance (CeFi). However, many brokers remain underprepared to handle complex reporting requirements, leaving some investors concerned about their future tax obligations.

Upcoming FIFO Rule — A Tax Nightmare?

The crypto industry has had its share of criticism for the upcoming changes, particularly the reliance on the FIFO method. Shehan Chandrasekera, Head of Tax at CoinTracker, called this approach potentially “disastrous” during a bull market. He warned that many investors could face unexpectedly high tax burdens by selling low-cost-basis assets.

2/ Now, there was a practical problem with this approach.

Almost all CeFi brokers were not ready to support Spec ID as of 1/1/25.

This meant that you had no option other than selling your CeFi assets under FIFO starting 1/1/25.

In a bull market environment, this could have…

— Shehan (@TheCryptoCPA) December 31, 2024

Chandrasekera explained that centralized brokers lack the tools to allow users to select specific assets for sale. The extra year provides platforms with a crucial grace period to develop solutions supporting alternative accounting methods. For many, the delay is less about convenience and more about necessity.

Adding to the tension, some organizations are pushing back against other IRS mandates. The Blockchain Association, the DeFi Education Fund, and the Texas Blockchain Council recently filed a lawsuit challenging a rule requiring DeFi brokers to report user data starting in 2027.