Revenue Procedure 2024-28 ended the universal cost basis method for crypto and replaced it with mandatory wallet-by-wallet (or account-by-account) tracking, effective January 1, 2025. As of 2026, the rule is in full effect. Form 1099-DA reports for 2025 transactions are now landing in taxpayer mailboxes, and brokers must begin reporting cost basis on covered securities for transactions made on or after January 1, 2026.
The transition window closed for most filers when the 2025 tax return deadline passed. Per the National Association of Tax Professionals, taxpayers who failed to take the safe harbor are now “locked in” to whatever allocations were made at the start of 2025. They cannot retroactively reallocate basis from wallet to wallet.
This guide explains what Revenue Procedure 2024-28 actually requires, where the safe harbor stood, what taxpayers and brokers need to do in 2026, and how to stay compliant going forward.
What Is Revenue Procedure 2024-28?
Revenue Procedure 2024-28 is the official IRS guidance, issued June 28, 2024, that governs how taxpayers transition from the universal cost basis method to wallet-specific tracking for digital assets. It sits alongside the final broker reporting regulations (TD 10000) issued the same day.
Per the official IRS Revenue Procedure 2024-28 PDF, the procedure provides a safe harbor under § 1012(c)(1) of the Internal Revenue Code for taxpayers to allocate unused basis to digital assets held in each wallet or account as of January 1, 2025. The legal foundation is the same that applies to specified securities under the Infrastructure Investment and Jobs Act of 2021, which expanded the definition of a specified security to include digital assets.
Three things changed permanently as of January 1, 2025:
- Universal cost basis tracking ended. Pooling assets across all wallets is no longer allowed.
- Wallet-by-wallet tracking became mandatory. Each wallet or exchange account is now its own basis pool.
- The safe harbor allowed a one-time reallocation. Taxpayers who acted by the deadline could distribute existing unused basis across their wallets without penalty.
What Was the Difference Between Universal and Wallet-by-Wallet Tracking?
Universal tracking pooled all crypto holdings across every wallet and exchange into one combined basis record. Wallet-by-wallet tracking treats each wallet or account as a separate basis pool. The shift sounds simple on paper but changes the math in real ways.
Under the universal method, a trader who bought 1 BTC at $30,000 in Wallet A and 1 BTC at $50,000 in Wallet B could choose either basis when selling, regardless of which wallet held the BTC being sold. Under wallet-by-wallet tracking, the trader must use the basis associated with the specific wallet from which the sale occurred. The two methods can produce materially different capital gains for the same sale.
The table below illustrates the difference using a worked example.
| Scenario | Universal Method | Wallet-by-Wallet Method |
|---|---|---|
| Wallet A holdings | 1 BTC at $30,000 basis | 1 BTC at $30,000 basis |
| Wallet B holdings | 1 BTC at $50,000 basis | 1 BTC at $50,000 basis |
| Sale: 1 BTC from Wallet A at $80,000 | Can use either basis | Must use Wallet A’s $30,000 basis |
| Reportable gain | $30,000 (using Wallet B basis) or $50,000 (using Wallet A basis) | $50,000 (forced) |
Per the Network Firm’s 2026 analysis, the default accounting method under the new rules remains FIFO (first in, first out), applied wallet-by-wallet. Taxpayers can elect Specific Identification, which allows linking specific tokens or lots to a transaction. Within Specific ID, advanced strategies like Highest In, First Out (HIFO) and Last In, First Out (LIFO) remain available. Without a specified election, FIFO is the default.
Why Did the IRS Change the Rules?
The IRS replaced universal tracking with wallet-by-wallet tracking to align crypto reporting with traditional securities reporting and reduce taxpayer manipulation of cost basis. Per Wolf & Co’s compliance breakdown, the IRS intends to bring digital assets fully into the same information reporting framework that already governs stocks and bonds.
Three drivers shaped the change:
- Audit traceability. Universal tracking made it impossible for the IRS to verify which lots were sold from which custodian. Wallet-specific tracking creates an auditable paper trail.
- Broker integration. Form 1099-DA reports basis at the broker level. That only works if taxpayer records also operate at the broker level.
- Regulatory parity. Crypto is property, taxed like stocks. Brokers report stock sales by account. The new rules apply the same logic to digital assets.
Per the Farrell Fritz New Crypto Playbook, crypto’s combined market capitalization grew from $14 billion in November 2016 to $4.28 trillion on October 6, 2025. The IRS treats that scale as a fully taxable asset class deserving the same reporting infrastructure as equities.
What Was the Safe Harbor in Revenue Procedure 2024-28?
The safe harbor was a one-time allocation provision that let taxpayers move unused cost basis from a universal pool into specific wallets without IRS penalty, provided the allocation was completed by the January 1, 2025 deadline. Per CoinTracking’s Rev Proc 2024-28 guide, the actual allocation had to be completed by the due date of the 2025 tax return (including extensions), filed in 2026.
The safe harbor was structured to prevent unfair tax outcomes during the transition. Without it, taxpayers might have struggled to prove the cost of assets held across multiple wallets, leading to overpaid taxes or unwanted complications.
Two allocation methods qualified for safe harbor protection:
1. Specific Unit Allocation
This method assigned specific units of crypto to specific wallets based on actual purchase records. A taxpayer who bought 2 BTC in Wallet A on March 1, 2022 at $30,000 each kept those exact units assigned to Wallet A. The approach required meticulous record-keeping but produced the cleanest audit trail.
2. Global Allocation
The global method applied a consistent rule across all holdings. A taxpayer might allocate the earliest acquired units to Wallet A and later acquisitions to Wallet B, then apply the same logic across every asset. The method had to be documented before January 1, 2025 and applied consistently afterward.
What Happens If You Missed the Safe Harbor Deadline?
Taxpayers who failed to make a safe harbor allocation by the deadline are now stuck with whatever basis distribution existed at the start of 2025 and cannot retroactively reallocate. Per the National Association of Tax Professionals, this can lead to serious consequences if records are incomplete.
If basis records cannot substantiate wallet-by-wallet positions, the IRS may disregard the claimed basis entirely and treat the sale as zero-basis. The full proceeds become taxable gain. That outcome turns what should have been a moderate capital gain into a significant tax liability.
For 2026 filers in this position, the practical steps are:
- Inventory every wallet and account where digital assets resided at any point during 2025.
- Reconstruct disposal transactions by identifying which wallet held the assets sold and applying that wallet’s basis.
- Report on Form 8949 and Schedule D with the wallet-specific calculations.
- Reconcile against Form 1099-DA when broker reports arrive in early 2026.
- Consider amended returns if late 1099-DA reports surface discrepancies.
How Does Form 1099-DA Fit Into the New Compliance Framework?
Form 1099-DA is the IRS’s new informational return for digital asset broker reporting, with the first filings covering 2025 transactions being delivered in 2026. Per Wolf & Co, brokers must distribute the form to clients by February 16, 2026 and submit to the IRS by March 31, 2026.
The reporting requirements unfold across multiple phases:
- 2025 transactions (filed 2026): Brokers report gross proceeds only. Basis reporting is voluntary.
- 2026 transactions (filed 2027): Brokers must report both proceeds and basis for covered securities.
- Real estate transactions (closing on or after January 1, 2026): Real estate professionals must report fair market value of digital assets paid by buyers.
A “covered security” is any digital asset purchased on or after January 1, 2026 and held in a broker’s custody. A “noncovered security” is any digital asset purchased before that date or not held in broker custody. For noncovered securities, taxpayers determine their own basis. Brokers can voluntarily include basis information but face no penalty for incorrect numbers.
Per the Forvis Mazars analysis, brokers making a “good faith” effort to file Form 1099-DA likely face no penalties for forms filed up to a year late. That creates the awkward scenario where a taxpayer could receive a 1099-DA after already filing the 2025 return. Amended returns may be necessary in those cases.
What Is IRS Notice 2025-7 and How Does It Affect 2026 Reporting?
Notice 2025-7 provides temporary relief letting eligible taxpayers rely on alternative methods for adequately identifying digital asset units held in broker custody. Per the IRS digital assets page, the notice softens the implementation timeline for taxpayers who would otherwise be unable to comply with strict wallet-by-wallet identification.
The notice is part of a broader set of transitional relief that includes Notice 2024-56 (transitional relief for information reporting) and Notice 2024-57 (broker reporting and penalty relief). Together, these notices shape what brokers and taxpayers must do in the 2026 filing season.
For 2026, the practical takeaway is that the IRS is enforcing the underlying rules but allowing meaningful flexibility in how identification is documented during the transition. That flexibility narrows each year as the system matures.
What Steps Should Taxpayers Take in 2026 to Stay Compliant?
Six concrete actions matter for 2026 filers and beyond. Each one closes a specific compliance gap that has tripped up taxpayers since the rule took effect.
1. Review Your Cost Basis Method
Confirm which method your records or tax software currently use. If you used universal pooling and missed the safe harbor deadline, work with a tax professional to reconstruct wallet-specific records before any further sales.
2. Compile Complete Transaction Records
Gather records for every purchase, sale, transfer, and conversion across every wallet and exchange. Each transaction needs date, amount, price, and the specific wallet or exchange. Per the National Association of Tax Professionals, missed records can trigger zero-basis treatment, which inflates taxable gains.
3. Reconcile Against Form 1099-DA
When broker forms arrive in early 2026, compare reported proceeds against your own records. The IRS will compare your return to broker reports, so any discrepancies need explanation. This connects to broader crypto wallet APIs for developers and businesses workflows that aggregate transaction history across venues.
4. Track Each Wallet and Account Separately Going Forward
Treat every wallet, exchange account, and on-chain address as its own basis pool. Per the IRS final regulations, this includes liquidity pools, staking pools, and third-party platforms where crypto is custodied.
5. Use Compliant Crypto Tax Software
Manual spreadsheet tracking no longer scales. Modern tax tools handle wallet-specific FIFO, Specific ID, and amended return generation. Vezgo customers like MoneyViz and Awaken build tax tools using the API as their data layer.
6. Stay Updated on IRS Guidance
The crypto tax rulebook is still evolving. Notices, revenue procedures, and final regulations continue to add detail. Bookmarking the IRS digital assets page is the simplest way to stay current.
How Does Vezgo Support Crypto Tax Compliance Under Revenue Procedure 2024-28?
Vezgo provides a single API that aggregates balance, position, and transaction data across more than 300 exchanges, wallets, blockchains, and DeFi protocols, with each connection presented as a distinct account that maps cleanly to wallet-by-wallet tracking requirements. That structure is exactly what Revenue Procedure 2024-28 demands.
For tax software providers, Vezgo handles the data ingestion layer that would otherwise require integrating each exchange and wallet separately. The API returns normalized transactions tagged by source account, with timestamps, fiat values, and transaction types ready for FIFO or Specific ID processing. Per the Vezgo crypto tax API page, this is the same model that powers tax products from Vezgo customers.
The architecture supports the full compliance stack:
- Wallet-by-wallet attribution. Every transaction is tagged with the source wallet or exchange, eliminating the universal-pool problem.
- Cost basis reconstruction. Transaction history with original timestamps lets tax software calculate accurate per-wallet basis.
- Form 1099-DA reconciliation. Vezgo data can be matched against broker reports to surface discrepancies before filing.
- Multi-year history. Records persist long enough to support amended returns and audit responses.
The same data foundation supports related workflows like KYC and KYT enrichment, crypto wallet and address screening, and the broader Vezgo API use cases covering compliance and tax products. For developers building on top of these capabilities, the patterns documented in SDK vs. API and read API vs. write API describe the architecture.
Security is built into the data path. Financial information links only to anonymous UUIDs. Vezgo never stores private keys and never has withdrawal access. SOC 2 Type 2 compliance and AES-256 encryption back every request. The API uses read-only access patterns, which means a Vezgo integration cannot move user funds. Pricing starts with a Free-to-Try plan and scales through usage-based tiers, all on the Vezgo pricing page.
For tax professionals serving clients across the crypto-friendly states and beyond, Vezgo turns wallet-by-wallet compliance from a multi-week reconciliation project into an automated workflow.
FAQs
What Is Revenue Procedure 2024-28 in Plain Terms?
Revenue Procedure 2024-28 is the IRS guidance that ended universal cost basis tracking for crypto and required taxpayers to track basis separately for each wallet or exchange account starting January 1, 2025. It also created a one-time safe harbor allowing taxpayers to allocate existing unused basis across their wallets without penalty. The procedure works alongside the final broker reporting regulations (TD 10000) and the new Form 1099-DA.
Did I Need to Do Anything by January 1, 2025?
If you held digital assets with unused cost basis on January 1, 2025 and used the universal method previously, you needed to allocate that basis across your specific wallets to qualify for the safe harbor. The actual allocation could be completed by the due date of the 2025 return including extensions in 2026, but the snapshot of holdings had to be accurate as of January 1, 2025. Taxpayers who missed this window are now locked into whatever basis allocation existed at that point.
What Happens If I Used the Universal Method and Missed the Safe Harbor?
Per the National Association of Tax Professionals, taxpayers who missed the safe harbor cannot retroactively reallocate basis from wallet to wallet. They must reconstruct wallet-specific records for 2025 transactions and going forward. If basis records cannot substantiate wallet-by-wallet positions, the IRS may treat sales as zero-basis, making the full proceeds taxable gain. Working with a qualified crypto tax professional is recommended for complex cases.
When Does Form 1099-DA Start Being Issued?
Brokers must distribute Form 1099-DA to clients by February 16, 2026 for 2025 transactions, and submit to the IRS by March 31, 2026. The first filings cover gross proceeds only. Cost basis reporting becomes mandatory for covered securities (digital assets purchased on or after January 1, 2026 and held in broker custody) starting with the 2026 tax year, filed in 2027. Per Forvis Mazars, brokers face penalty relief for late or incorrect filings made in good faith during the transition period.
Does Wallet-by-Wallet Tracking Apply to DeFi and Self-Custody Wallets?
Yes. Per the IRS final regulations, wallet-by-wallet tracking applies to every place crypto resides, including exchange accounts, self-custody wallets, hardware wallets, liquidity pools, staking pools, and third-party DeFi platforms. The current regulations exempt non-custodial brokers from Form 1099-DA reporting, but taxpayers remain responsible for tracking basis across all custody locations regardless of whether the venue files a 1099-DA.
What Are the Default and Optional Cost Basis Methods Under the New Rules?
The default method is FIFO (first in, first out), applied wallet-by-wallet. Taxpayers can elect Specific Identification, which lets them link specific tokens or lots to a sale. Within Specific ID, advanced strategies like HIFO (highest in, first out) and LIFO (last in, first out) remain available. If pulled for audit, the taxpayer carries the burden of proving compliance. Maintaining accurate, contemporaneous records throughout the year is essential, especially for taxpayers using anything other than wallet-level FIFO.
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