IRS Revenue Procedure 24-28 and how Crypto Backoffice helps with it's compliance

Chicago, IL – Jan 7, 2025 – With over millions of U.S. crypto investors impacted by new IRS revenue procedure 24-28 this shift enhances transparency but adds complexity for digital asset market participants in managing and reporting about their portfolios.

Revenue Procedure 2024-28, introduced in July 2024, requires U.S. taxpayers to identify and assign coststo each of their digital asset holdings. Crypto Backoffice is the scalable, robust and compliant solution with cost tracking for each unit separately as digital assets sales would now require its holders to account for tax gain/(loss) in a more structured manner where they need to have enough records to identify the cost of each unit sold. When sold, taxpayers can choose which unit is deemed to be sold from their digital assets portfolio and they would need to identify the cost of such “units sold” along with enough records to substantiate the cost associated with such units.

End of Universal Wallet and Beginning of wallet-by-wallet tax accounting.

New regulations end Universal wallet accounting starting from January 1, 2025. When you sell digital assets out of your holdings, you need to identify which units have been sold from your portfolio and what cost is associated with such units.

IRS suggested some rules and methods for reallocation of cost basis and issued safe harbor rules under Rev. Proc. 2024-28, on which taxpayers may rely to allocate unused basis of digital assets to digital assets held within each wallet or account of the taxpayer as of January 1, 2025.

It also 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.

Relief

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.

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, for this, taxpayers must maintain accurate records of their chosen methodology to ensure compliance with IRS requirements.

“Meet the compliance requirements for crypto taxes without disrupting the financial strategies.”

Crypto Backoffice ™ (backed by Formidium)  - Digital Asset platform for tax and accounting, with features such as wallet-by-wallet portfolio accounting required by IRS and can maintain cost basis record of each unit separately, irrespective of the volume of transactions during the year.

It’s more than a platform but an ecosystem for the digital asset industry.

Crypto Backoffice ™ process facilitates a seamless migration from Universal Cost-Basis tracking to Per-Wallet tracking.