I just noticed some quite positive news for crypto holders in the US. The IRS has just issued Notice 2026-20, allowing cryptocurrency investors to use their own reporting methods instead of following the reports submitted by exchanges. This is the second time the agency has extended this support measure, and it could significantly reduce tax bills for investors.

As you may know, previously the IRS required exchanges to apply the FIFO method to track purchase and sale prices. This means that the oldest coins, bought at lower prices but with significant gains, had to be reported first. As a result, tax bills would be higher due to larger capital gains. But now, with alternative reporting methods, you can choose to report more recent coins that were bought recently and haven't appreciated much or are even at a loss. This is a pretty big change.

According to Shehan Chandrasekera, head of tax at Coin Tracker, this guidance will bring considerable relief to investors, although some challenges remain. He commented that the IRS has quietly saved crypto investors from a major tax issue. This temporary relief will last until the end of 2026.

But behind this move is not just the IRS’s goodwill. The strict crypto reporting regime creates enormous compliance burdens for exchanges. Brokers must report the cost basis for each coin each investor purchases, along with other data. They even have to provide copies of reports to clients or mail them if electronic filing is not chosen. Most exchanges have complained that this creates an overwhelming operational burden.

Therefore, the IRS has chosen phased reporting to ease the pressure. Initially, the reports submitted in 2025 only included total revenue from crypto asset sales. For assets purchased in 2026, the new cost basis data will be included in Form 1099-DA reports. Recently, the IRS also proposed removing printed copies sent to clients and making electronic submission the default for tax reports.

Overall, this is good news for those worried about reporting crypto to the IRS. Now you have more autonomy in how to declare your crypto transactions instead of being bound by reports submitted by exchanges. Although some complexities remain, at least the tax authorities are beginning to see this issue more practically.