IRS Safe Harbour & Revenue Procedure 2024-28
In this guide, we’ll break down how IRS Revenue Procedure 2024-28 will transform crypto tax reporting, the steps you need to take to avoid penalties, the IRS safe harbor provision, and how Koinly helps streamline the transition for your crypto portfolio tracking and taxes.
What is IRS Revenue Procedure 2024-28?
Revenue Procedure 2024-28 is part of the IRS's continuous updates to tax procedures. The new rules came into effect on January 1, 2025.
In simple terms, IRS Rev. Proc. 2024-28 changes how crypto is tracked and reported. Taxpayers must now track and report digital asset transactions separately for each wallet and account, instead of universally tracking all assets across all accounts.
A Revenue Procedure is an official statement from the IRS that provides guidelines, rules, or instructions on how taxpayers or tax professionals should comply with specific tax laws or administrative processes. In this case, Revenue Procedure 2024-28 outlines the steps and deadlines for transitioning from the "universal wallet method" to the "wallet-by-wallet method" for reporting crypto transactions.
How IRS Rev. Proc. 2024-28 changes crypto taxes
Previously, many investors used universal cost tracking, although wallet-based tracking was also allowed. Under IRS Rev. Proc. 2024-28, this changed in 2025. The main updates are:
Wallet-based cost tracking: Each wallet or account must now be treated as an independent ledger. Whether you hold assets in cold storage, on-chain wallets, or exchanges, each is tracked separately.
Safe Harbor provision: By January 1, 2025, taxpayers need to allocate their unused basis to specific wallets and accounts to qualify for safe harbor protections, shielding them from penalties for misallocation.
Accounting methods: The default accounting method remains FIFO (First In, First Out), applied wallet-by-wallet. However, taxpayers can use Specific Identification (Specific ID), which allows more control by linking specific tokens or lots to a transaction. Within Specific ID, advanced accounting methods like Highest In, First Out (HIFO), and Last In, First Out (LIFO) can be used.
Accurate records remain essential. If you’re audited, you must be able to prove compliance.
What do investors need to do about cost basis tracking?
Investors need to switch to wallet-based tracking from January 1, 2025. This requires:
Allocating your cost basis across all wallets for each asset.
Using wallet-level tracking going forward.
There are two ways to allocate unused basis:
Specific unit allocation (manual)
You manually assign unused basis units to either a pool of assets in one wallet or specific lots inside that wallet. This is the most accurate method, but also the most work.
Global allocation
You create a general rule to spread unused basis across a wallet’s remaining assets. It’s simpler and less precise, but easier for most investors.
Different tax software will vary in how they support these allocations.
What is the IRS Safe Harbor for Crypto?
Rev. Proc. 2024-28 offers Safe Harbor protection to help investors move from universal to wallet-based tracking.
What Safe Harbor does
Under the old rules, investors could treat all assets as if they lived in a single “universal wallet,” even if they were spread across exchanges. Now, assets must be tracked by wallet, and universal tracking is no longer allowed.
Safe Harbor lets taxpayers transition by making a reasonable allocation of unused basis into specific wallets, as long as:
The wallet holds the same number of remaining units, and
The unused basis relates to the same type of digital asset.
Who qualifies?
You must hold digital asset units and have unused basis on January 1, 2025.
Safe Harbor cannot be used for any assets acquired or transferred on or after January 1, 2025.
You must have a clear record showing you migrated from universal to wallet-based cost tracking, using a global allocation method, before January 1, 2025.
Koinly makes it easy with automated tools to track wallets, allocate unused basis, and keep you IRS-ready. Don’t miss this opportunity to transition smoothly and avoid penalties.
How to prepare for new IRS crypto tax rules
Consolidate wallets: Combine smaller balances and organize accounts with clear purposes to simplify reporting.
Allocate cost basis: Assign the original purchase price and acquisition date for each asset by wallet before January 2025.
Seek expert help: Engage an experienced crypto tax accountant in the US to reconcile past filings, ensure compliance, and avoid audit risks.
Plan year-end taxes: Harvest tax losses, make estimated tax payments, and consider charitable donations for potential tax savings.
How Koinly is handling the changes & safe harbor provision
Koinly has implemented a single (global) allocation method for all users, which will allow you to easily migrate from universal to wallet-based tracking without impacting past returns, which will go live in December 2024.
Learn more in our help guide on migrating to wallet-based cost basis tracking.
FAQs
Why did the IRS introduce Rev. Proc. 2024-23?
The IRS is working to address the growing complexities of crypto tax compliance. Since designating crypto as “property” for tax purposes in 2014, the agency’s approach has been incremental. Rev. Proc. 2024-23 is the latest effort to close gaps in reporting clarity and provide a more structured framework for tracking and taxing digital assets.
What are the new reporting requirements for brokers?
This new rule complements another change to crypto tax rules introduced by the IRS, namely Rev. Proc. 2024-28. This rule specifically addresses digital asset cost basis tracking. Starting in 2025 brokers must issue Form 1099-DA, to theoretically make it easier for taxpayers to report crypto gains and losses.
Read next: What is Form 1099-DA?
What are the other key changes from Rev. Proc. 24-28?
Form 1099-DA reporting will be required starting in 2025 for transactions that occur after 2024. The form covers information on gross proceeds from sales, similar to traditional 1099 forms for securities, but specifically designed for crypto. We have dedicated guides on both Form 1099-DA and previous crypto 1099 forms.
What does Rev Proc 24-28 mean for crypto investors and businesses?
Broker responsibilities: Starting in 2025, brokers must provide taxpayers with Form 1099-DA, reporting transaction details like cost basis and proceeds from sales. This form is crucial because it will reduce discrepancies between what the IRS knows about a taxpayer's transactions and what the taxpayer reports, helping avoid penalties or audits. Investors in theory will start receiving these in 2026, but some exchanges - like Coinbase - are already asking for more time to put processes in place to achieve this.
Investors' cost basis obligations: Investors must ensure they track their acquisition costs and dates of digital assets accurately. Rev. Proc. 2024-28 introduces rules for basis allocation, which allows taxpayers to allocate basis between different units of digital assets held in their accounts before 2025. This can help investors accurately report gains or losses when they sell or trade their assets in future years. Importantly, once an allocation is made under the safe harbor, it is irrevocable.
Overall, the IRS's push for stricter crypto tax compliance is intended to streamline reporting and improve accuracy, but it also places new burdens on both brokers and investors to ensure they are keeping detailed and accurate records of all digital asset transactions.
