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Juggling multiple wallets, exchanges, and blockchain networks? Drowning in spreadsheets trying to reconcile crypto transactions? You're not alone. Many accounting professionals struggle with the complexities of crypto accounting, especially with the new IRS guidelines under Rev. Proc. 2024-28. These guidelines introduce significant changes to digital asset reporting for the 2025 tax year, requiring more granular tracking and reporting on a wallet-by-wallet basis. This article clarifies these changes, explains the safe harbor provision, and offers actionable steps to prepare your digital asset portfolio for compliance. We'll also explore how automated solutions can simplify these tasks, freeing you from tedious manual processes and giving you back time to focus on higher-value tasks—or simply enjoy life outside the office.

Stay IRS-compliant with crypto accounting software designed for wallet-level tracking and digital asset tax reporting under Rev. Proc. 2024-28. Cryptoworth automates reconciliation across wallets and exchanges, helping accounting teams simplify compliance, reduce audit risk, and eliminate spreadsheet chaos.

Key Takeaways

  • Track each digital asset individually: Rev. Proc. 2024-28 requires reporting the cost basis for each digital asset held in every wallet and account. This detailed tracking is essential for compliance starting January 1, 2025.
  • The safe harbor simplifies transition: Use the safe harbor provision to allocate any unused cost basis to assets held before 2025. This one-time adjustment helps align your records with the new IRS guidelines.
  • Software automates complex tracking: Crypto accounting software helps manage the detailed tracking required by Rev. Proc. 2024-28. It automates data import and cost basis calculations, saving you time and ensuring accuracy.

What is Rev. Proc. 2024-28?

Definition and Impact

Rev. Proc. 2024-28 offers new IRS guidelines on reporting digital assets for tax purposes. These guidelines require taxpayers to report on an account-by-account or wallet-by-wallet basis. This means each wallet or account with digital assets needs its own cost-basis report, adding complexity for crypto users.

Cryptoworth explains how this wallet-by-wallet reporting complicates tax reporting. This change increases complexity for individuals and businesses using cryptocurrency. It also invites more IRS scrutiny.

The guidelines offer a safe harbor under § 1012(c)(1) of the Internal Revenue Code. This lets taxpayers allocate unused basis of digital assets held in each wallet or account as of January 1, 2025. This framework is important for accountants and tax professionals as they plan for future compliance.

Taxpayers who don't adapt risk compliance challenges. Many taxpayers are unprepared for this. Accountants need to understand these requirements and prepare their clients.

How Digital Asset Tracking Changes

Infographic explaining key aspects of Rev. Proc. 2024-28 for crypto tax reporting.

With the 2025 tax season approaching, understanding the IRS guidelines outlined in Rev. Proc. 2024-28 is more important than ever for accurate crypto tax reporting. These new rules bring changes to how you track and report digital assets. Let's break down the key updates.

Track Individual Assets, Not Just Wallets

The IRS now requires more granular tracking of your digital assets. A general overview of your wallet balance isn't enough anymore. Now, you need to track the cost basis of each individual asset within your wallets. This means keeping records of when you acquired each asset, how much you paid, and any associated fees. Think of it like tracking individual stocks in a portfolio, rather than just the total portfolio value. This is especially important for those holding self-custodial assets. The upcoming 2025 IRS guidelines require cost-basis tracking on an account-by-account or a wallet-by-wallet basis if the assets are self-custodial.

Use Specific ID and FIFO

Calculating your profit or loss when selling requires a specific method. You must now identify which specific asset you sold at the time of the sale using the Specific Identification method. Alternatively, you can use the First-In, First-Out (FIFO) method. FIFO assumes the first asset you acquired is the first one you sell. This shift impacts how you manage records and calculate gains or losses. Make sure your current system can handle these calculations.

How It Works

The safe harbor, described in Rev. Proc. 2024-28, lets you allocate any unused cost basis to assets you held before January 1, 2025. This one-time adjustment helps align your cost basis calculations with the new regulations. It applies to digital assets within each wallet or account. The safe harbor is designed for taxpayers who used the old universal method. It helps them fix their records by the January 1, 2025 deadline.

Pros and Cons

Using the safe harbor offers several advantages. It helps ensure compliance with the updated IRS guidance. It also reduces the work of recalculating the cost basis for past transactions. But remember, this is a one-time fix. Failing to use the safe harbor and correctly reporting your digital assets could mean tax penalties. Consider the safe harbor carefully. It's a valuable tool to simplify your transition and ensure accurate tax reporting.

Meet Compliance Requirements

This section covers the key dates and requirements for complying with Rev. Proc. 2024-28. Understanding these aspects will help you prepare and adjust your crypto accounting practices.

Implementation Timeline

The new rules go into effect on January 1, 2025. Digital assets acquired before this date can still use the safe harbor, but assets acquired after cannot. Start preparing now.

Track Assets Correctly

Starting January 1, 2025, you must track the cost basis for each digital asset held in each wallet and account separately. Each wallet or account holding digital assets needs its own cost-basis report. This adds complexity to crypto tax reporting. You can use either Specific Unit Allocation or Global Allocation to assign your cost basis. Consult a tax professional if you're unsure which method suits your situation best.

Accurate reporting is the foundation of complying with Rev. Proc. 2024-28. You must track the cost basis for each digital asset in each wallet or account separately, according to these guidelines. Detailed records of all your transactions are essential. This includes acquisition dates, original cost, and all transfers between wallets. The IRS’s new guidelines add complexity to tax reporting for crypto users, especially the account-by-account or wallet-by-wallet requirement. Accurate and detailed record-keeping is essential for a smooth tax season.

Prepare Your Digital Asset Portfolio

Getting ready for the new IRS guidelines might feel like a big job. But taking these steps now will make tax season much smoother.

Audit Your Tracking Methods

The 2025 IRS guidelines change how you report digital assets. You will need cost-basis tracking for each account. If you self-custody your assets, you'll need to track by wallet. Many taxpayers aren't ready for this. Don't wait until the last minute. Review the IRS Rev Proc 2024-28 compliance questions to learn about the upcoming changes. You can also read this article on Rev Proc 2024-28 compliance to get prepared.

Start by reviewing your current tracking methods. Can you separate transactions by wallet and account? Can you easily calculate the cost basis for each wallet? If not, it's time to consider new systems.

Implement New Tracking Systems

Cryptoworth helps you separate transactions. You can easily track by wallet and account. This ensures accurate cost basis tracking for each wallet. It also helps you comply with IRS standards. Using Cryptoworth’s features and the safe harbor provision helps ensure compliance. It also reduces your workload. Learn how Cryptoworth helps you prepare for Rev. Proc. 2024-28. Think of it as future-proofing your crypto accounting.

What Happens If You Don't Comply?

Penalties and Scrutiny

Staying compliant with tax regulations isn't just a best practice—it's a necessity. Failing to comply with Rev. Proc. 2024-28 could result in tax penalties. The IRS is increasing its focus on digital assets. It's more important than ever to understand the updated rules and their impact on your record-keeping. Taking the time now to meet these requirements will save you trouble later.

Report Accurately

Accurate reporting is the foundation of complying with Rev. Proc. 2024-28. You must track the cost basis for each digital asset in each wallet or account separately, according to these guidelines. Detailed records of all your transactions are essential. This includes acquisition dates, original cost, and all transfers between wallets. The IRS’s new guidelines add complexity to tax reporting for crypto users, especially the account-by-account or wallet-by-wallet requirement. Accurate and detailed record-keeping is essential for a smooth tax season.

Meet wallet-level IRS reporting requirements with crypto accounting software that automates cost basis tracking and audit-ready tax reporting. Cryptoworth’s platform is built for granular digital asset reconciliation, helping you stay compliant with Rev. Proc. 2024-28 while reducing the time spent on manual record-keeping.

How Accounting Software Helps with Compliance

Staying compliant with evolving tax regulations like Rev. Proc. 2024-28 can feel overwhelming. The right accounting software can simplify things. Let's see how.

Find Compliant Software

The IRS’s new guidelines require taxpayers to report digital assets on a wallet-by-wallet basis. This adds complexity for crypto users. Look for software that meets these requirements. Features like wallet-level cost-basis reporting and transaction segregation are essential for accurate reporting. Cryptoworth, for instance, offers tools to segregate transactions by specific wallets and accounts. This ensures each wallet’s cost basis is tracked accurately and complies with IRS standards.

Simplify Tracking with Automation

Manually tracking crypto transactions is time-consuming and prone to errors. Automated accounting software imports transaction data directly from various sources. This saves you time and reduces the risk of mistakes. This automation is key to complying with Rev. Proc. 2024-28 while minimizing your workload. Cryptoworth helps you take advantage of the safe harbor provision, further streamlining compliance.

The IRS issued Rev. Proc. 2024-28 to clarify how to determine the basis of digital assets. These guidelines introduce important changes for the 2025 tax year. Understanding these changes now will make tax season much smoother.

Start by auditing your current crypto tracking methods. The new rules require cost-basis tracking on an account-by-account or wallet-by-wallet basis for self-custodied assets. Each wallet or account needs its own cost-basis report. This can be a lot of work if you manage many wallets or accounts.

The safe harbor method lets you allocate the unused cost basis of your digital assets. This allocation applies across your wallets and accounts as of January 1, 2025. Learn more about the safe harbor and how it simplifies reporting. While helpful, it's important to understand all the details. Make sure it's the right choice for your situation.

Many taxpayers are not ready for these changes. Take action now to avoid compliance issues. Consider implementing new tracking systems. Make sure they comply with the updated guidelines. Cryptoworth offers features to simplify your crypto accounting and help you comply with these new rules.

Handle Complex Transactions

DeFi and NFT Transactions

The 2025 IRS guidelines bring changes to digital asset reporting. These guidelines require cost-basis tracking per account, or per wallet for self-custody. As DeFi and NFT transactions become more common, accountants need to handle these assets accurately to comply with the new IRS rules.

Wrapped staking, NFTs, and other DeFi transactions can be tricky to classify and track. Accurate reporting is essential. The right tools can simplify these tasks, saving you time and reducing errors. This frees you to focus on other important work.

Manage Multiple Wallets

The new IRS rules mean each wallet needs its own cost-basis report. This adds complexity to crypto tax reporting. Managing multiple wallets across different blockchains and tracking every transaction can be a lot of work. Cryptoworth offers features and uses the safe harbor provision to simplify this. This helps ensure compliance and reduces your workload. You can easily reconcile data and generate reports, giving you more time for other tasks—or even some personal time.

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Frequently Asked Questions

What is the main change introduced by Rev. Proc. 2024-28? The most significant change is the shift to wallet-by-wallet reporting for digital assets. This means you need to track the cost basis of each digital asset in every wallet you own, rather than just tracking the overall value of your wallets. This new level of detail is required for accurate tax reporting under the updated guidelines.

What is the safe harbor provision, and should I use it? The safe harbor allows a one-time adjustment to allocate any unused cost basis to your digital assets held as of January 1, 2025. This can simplify your transition to the new rules, especially if you haven't been tracking individual asset cost basis previously. However, it's a one-time option, so carefully consider if it's the best approach for your specific tax situation. Consulting a tax advisor is always a good idea.