Does LIFO or FIFO need to be used when
recording cryptocurrency transactions? This is Vincenzo Villamena from
Online Taxman. Now the first part of the question is what is LIFO or what is FIFO
other than really catchy phrases? LIFO means Last In First Out. FIFO means First
In First Out. So what does that really mean in the scope of this conversation?
LIFO is when the last crypto that you bought is also the first crypto that you
sold. Or in other words FIFO is the first in first out, meaning the crypto
that you bought longest ago is classified as the crypto that sold most
recently. The point being is LIFO the way crypto has kind of gone up over the
years, FIFO you’re going to see a larger gain but it’s also going to be
over a longer term, versus LIFO is generally a shorter gain because it’s
the most recent crypto that you sold but it’s going to be over a shorter term so it
might lead to short-term capital gains which is generally taxed higher than
what is a long-term capital gain, which is currency that you’ve held for over a
year. So LIFO versus FIFO really depends on your situation, depends on how long
you’ve held these cryptocurrencies, it depends on what is your gain on the
cryptocurrencies. At this point in time the IRS has not released any
guidance on whether you need to use LIFO or FIFO, or how you might be able to
elect to use LIFO etc. So we’ve told our clients that it’s really your
discretion, given the lack of clarity by the IRS, to use LIFO or FIFO.
We do the analysis for our clients in order to determine what would be better
for them, both in the short term in the filing year and then even potentially in
the long term depending on what their strategy is. Go to onlinetaxman.com
and we’re happy to advise you on any of the crypto questions that you have.
We are your cryptocurrency experts. We do accept crypto. Please
come to the website and talk to me or any of our experts and we’re happy to
help. Thank you!