In August 2024, the IRS released Revenue Procedure 2024-28, which marked a major shift in how taxpayers are required to report digital asset transactions. For years, many individuals and software providers used a "universal" accounting approach, treating all wallets and accounts as a single pool for cost basis purposes. This method, while simpler, blurred the lines between wallets and sometimes created inaccuracies in gain/loss reporting.

The new IRS regulations, effective January 1, 2025, require a per wallet (or per account) accounting method. This means each wallet or exchange account must be tracked independently when determining cost basis, gains, and losses.

Why Does This Matter?

1. Accuracy – Wallet-level accounting provides a more precise view of tax obligations, preventing mistakes that arise from pooling across wallets.

2. Compliance – The IRS is signaling a push toward more granular and auditable record-keeping. This aligns crypto reporting with traditional securities accounting.

3. Safe Harbor – To ease the transition, taxpayers are allowed to allocate unused basis as of January 1, 2025, across wallets. This safe harbor requires documentation by that date but gives flexibility to finish the allocation later, before filing 2025 returns.

Are They Relevant for You?

For taxpayers and accountants who have been using universal methods, these regulations represent a significant change. It means more record-keeping and potentially revisiting prior reporting practices. But for forward-thinking software and services already aligned with wallet-level accounting, the new rules validate their approach.

How does Awaken handle the recent IRS per wallet accounting (Rev. Proc. 2024-28)?

Since Awaken launched on Jan 1st, 2023, we have always used per wallet accounting for all of our algorithms. So one could say we conformed to the IRS rules before the IRS conformed themselves! We try to be ahead of the curve on everything we do 🫡. Per wallet accounting has always been the best method as it is the most precise and transparent way to track individual transactions, ensuring accurate reporting and compliance while allowing for easy reconciliation of balances across multiple wallets.

That means you can continue using Awaken as is. We already comply with the new per wallet method of accounting. You can upload your wallets, categorize transactions, and pull a single 8949 that conforms to the proper standard of computing cost basis.

But if you’re curious, what does this new requirement by the IRS actually mean?

Here is a really great writeup on Gordon Law Ltd, a crypto accounting and legal team Awaken consults with for advice on different tax treatment. We highly recommend reading it:

👉 Gordon Law on IRS Rev. Proc. 2024-28

Revenue Procedure 2024-28 introduces significant changes to how taxpayers must report digital asset transactions, effective January 1, 2025. Previously, many taxpayers used a "universal" method, aggregating all digital assets across various wallets and accounts for cost basis calculations. The new guidelines mandate that cost basis must be determined on a wallet-by-wallet or account-by-account basis. This means each digital asset's cost basis must be tracked and reported separately within the specific wallet or account where it's held.

To facilitate this transition, the IRS has provided a safe harbor provision within Rev. Proc. 2024-28. This allows taxpayers to allocate any unused basis of digital assets held as of January 1, 2025, across their various wallets or accounts. Taxpayers must document their allocation method by January 1, 2025, though the actual allocation can be completed later, provided it's done before filing their 2025 tax returns. This safe harbor aims to ease the shift to the new reporting requirements and ensure compliance.

In summary, Rev. Proc. 2024-28 requires taxpayers to:

• Transition from a universal to a wallet-by-wallet or account-by-account method for tracking and reporting digital asset cost basis.

• Utilize the safe harbor provision to allocate unused basis among wallets or accounts, with the allocation method documented by January 1, 2025.

These changes necessitate that taxpayers maintain detailed records for each digital asset within its respective wallet or account to comply with the updated IRS requirements.

Awaken does this for you out of the box already! And you just pull a single 8949 etc… which includes all of your trades across wallets, but using the wallet based accounting method to calculate the cost basis.

If you’d like to talk to a CPA for tax advice on your specific situation, you can check out our recommended crypto accountants.