IRS Crypto Tax Rules Create Impossible Requirements, Industry Warns
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The IRS's proposed digital asset regulations create impossible requirements for taxpayers and brokers to comply with specific identification cost basis reporting.
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Taxpayers can't notify brokers which specific crypto assets to sell before a trade, yet they are required to for compliance.
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It's impossible for taxpayers to calculate crypto taxes manually, yet software can't support the required specific identification method.
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If taxpayers can't comply, their cost basis defaults to FIFO, potentially causing huge tax liabilities.
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The IRS should eliminate cost basis reporting and only require proceeds reporting to solve these issues.