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:

https://x.com/accounting/status/1871410967273431378

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:

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.

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If you’d like to talk to a CPA for tax advice on your specific situation, you can check out our “Get tax help” tab on our website. We have a list of fantastic crypto CPAs listed there 💯