The U.S. Internal Revenue Service has extended temporary relief for cryptocurrency investors during the tax filing season. Its latest guidance allows investors to use alternative methods to identify crypto sales for tax purposes instead of relying strictly on broker-submitted reports, potentially lowering tax bills. This relief, which now runs until the end of 2026, also addresses significant compliance burdens for crypto exchanges under the agency’s reporting regime.
The U.S. tax season has arrived with some relief for cryptocurrency holders using centralized exchanges. In its latest guidance, the U.S. Internal Revenue Service gave crypto holders a pass to use alternative methods to identify crypto sales for tax purposes. This is the second time the watchdog has extended this relief, which could help lower the tax bill for crypto investors.
Initially, the agency mandated crypto exchanges to adopt the FIFO method to track investors’ buy and sell prices for each coin. For users, this meant that the oldest coins, which were acquired cheaply and have since appreciated significantly, should be reported first. With alternative reporting methods, however, investors could include the most recently acquired coins that haven’t rallied much or are in the red.
According to Shehan Chandrasekera, head of tax at Coin Tracker, the IRS guidance will offer incredible relief to investors. He said, “The IRS just quietly saved crypto investors from a massive tax headache by issuing Notice 2026-20.” The temporary relief will be extended up to the end of 2026.
The move isn’t out of just goodwill from the taxman, as its strict crypto reporting regime has a compliance burden on operators. Crypto exchanges must report the cost basis for each coin bought by each investor to the IRS, along with other data. Most brokers have complained that this would be a massive operational burden.
To alleviate this, the agency opted for phased-in reports, starting with only gross proceeds or total crypto sales in reports submitted in 2025. For crypto assets bought in 2026, cost basis data was included in the submitted reports. Earlier this month, the IRS proposed scrapping physical copies sent to customers and making ‘electronic submission’ the default for tax reports.
