Don't know if this has been answered before. I remember with one of my accountants (don't know which one), he had me sign a general contract...What was their duty and what was ours. We give him honest information and he prepared our taxes. In the contract it stated, unless we requested otherwise, all stock/bond trades would be FIFO. I know other accounting is used for businesses...LIFO. Just wondering for all personal trading, is it always FIFO??
Well, unless you're a short term trader, it makes more sense to hold on to your position LONGER to take advantage of long-term capital gains. With LIFO, that wouldn't be so feasible. Anyway, I'm pretty sure FIFO method is what's used by IRS when they audit your taxes.
It's the default. But, sometimes you can cut your tax burden when computing wash sales by using LIFO. Most brokers will accept your instructions as to how you want them to handle the reporting. https://www.fool.com/knowledge-center/how-to-sell-stock-with-fifo-or-lifo.aspx https://www.wellsfargoadvisors.com/pdf/wash-sale.pdf
You can use fifo, lifo, or lot selection. a decent broker will let you choose. it can be worth a lot in deferred taxes to manage this (especially if you are old, will die soon, and plan to give your brokerage account to your kids who can enjoy a step up in basis).
My limited experience with the IRS is that they will accept any accounting rules on cost basis, as long as the tax preparer is consistent. Certainly some filers can get away with "inconsistent". But best to stay consistent, no issues.