First In, First Out
First In, First Out (FIFO) refers to the inventory method used while calculating taxes on a cost basis. Introduced by the IRS, FIFO is used when U.S taxpayers are unable to identify a cryptocurrency’s unit.
Every time someone disposes or receives a cryptocurrency, there are subjected to capital gains, thus paying income tax based on the transaction. For anyone making a profitable trade on cryptocurrency, or even receiving interest from their crypto holding, they are liable to pay taxes.
With the FIFO method, the assets are calculated as if being sold in the same chronological order they were bought. Based on the latest cryptocurrency tax guidelines. IRS recognizes FIFO and Specific Identification as the recommended method for calculating cost basis.
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