IRS Extends Crypto Tax Deadline: What It Means for CeFi and DeFi Traders

Seems like the IRS has thrown us a bone by extending the crypto tax reporting deadline by a year. This should give CeFi exchange users a little breathing room. However, this is just a band-aid solution in the grand scheme of crypto currency exchange trading regulations. The IRS is still hammering out the final rules for DeFi reporting, which could impact trading crypto in the US. Let’s dive into what all this means for crypto traders and brokers.

What’s New from the IRS?

The IRS is now giving taxpayers an extra year to figure out how to report their crypto taxes. Why? Because they realized people actually need a chance to adapt to these new guidelines. This extension is mainly for trading on crypto platforms that fall under CeFi. The IRS’s announcement in Notice 2025-07 highlights the growing complexity behind everything to know about crypto trading.

For a while, the IRS was sticking to a wallet-by-wallet approach to calculating gains and losses. But now, they’re allowing people to keep using their existing records or tax software to identify what they’re selling or transferring. Honestly, it’s a temporary relief but still a relief of sorts.

CeFi vs. DeFi Compliance Struggles

The deadline extension certainly helps US crypto trading brokers and taxpayers. As it stands, many CeFi brokers were not ready to handle Spec ID by the original deadline. And let’s be honest: defaulting to FIFO could lead to nasty tax surprises when people start selling. Now, this extension is only for those trading crypto to crypto movements made between January and December of 2025. Moving forward into 2026, taxpayers will have to choose an accounting method through their broker.

Meanwhile, the government has finalized new rules on DeFi reporting. Brokers will now need to report sales of digital assets through Form 1099. Good news? It doesn’t add more tax obligations. Bad news? It means even more paperwork to deal with.

IRS Lures Industry Experts

In a bid to get a handle on all this, the IRS has recruited former crypto executives. Great. More crypto traders in the IRS. They’re obviously hoping that these hires will sharpen their digital asset intelligence.

The IRS seems to really be going hard trying to combat tax evasion in the crypto space. They’ve built out hundreds of criminal cases and even created the Office of Cyber and Forensic Services (CFS). This new office is all about digging into criminal uses of digital assets and figuring out how to crack down on them.

Final Thoughts

In essence, this is a momentary respite for CeFi users. But it’s clear that the IRS is not going to ease up any time soon. As the regulatory landscape continues to shift, the pressure is on for crypto traders and brokers to stay one step ahead. Using AI and specialized trading software for crypto will be key in navigating the complexities of this new landscape. Automation for transaction tracking, precise calculations of tax liabilities, and generating IRS-compliant reports are all going to be huge.