Do you need to work with crypto CPA? Do you need the services of a cryptocurrency tax accountant? That question and decision that will significantly impact how much you pay in taxes, your overall financial health and wealth and whether you’ll avoid IRS problems like heft fines and penalties from errors on your tax return.
There is no doubt that cryptocurrency has made life easier for many people around the world. But when it comes to paying taxes, things get more complicated than they should.
For one, crypto taxation regulations are complicated, and you can’t be too sure about what makes up a taxable transaction. And if you deal with cryptocurrencies a lot, there’s a possibility that you might fail to keep track of all your transactions, putting you at risk of being audited by the IRS.
This guide to crypto accountants will explain what qualifies as a crypto taxable event, what a cryptocurrency tax service can do for you, and how to find a good crypto tax accountant.
What Does A Crypto Tax Accountant Do?
Crypto tax advisors should help you understand your obligations and responsibilities when dealing with cryptocurrencies and blockchain technology. There are four main areas where a crypto CPA or crypto tax accountant can assist you:
Tax preparation — This involves ensuring that you file accurate returns for each tax period and ensuring you don’t miss any required information. A crypto CPA can help you prepare your taxes using software such as TurboTax.
Audit defense — A cryptocurrency accountant can help defend against potential penalties and fines if the IRS ever audits you.
Compliance — Crypto tax advisors can ensure you follow the latest regulatory changes and stay compliant. They can also advise you on the best ways to reduce your risk of audits.
Planning — A crypto CPA can offer advice on how to structure your finances to minimize taxes while balancing spending and saving.
Not all transactions need the same level of scrutiny. Some transactions may not require much documentation, so you can do them yourself. However, some transactions will require more detailed crypto tax accounting, and you’ll want someone familiar with the latest tax regulations.
Here Are Some Questions You Should Ask When Hiring A Crypto Accountant:
- How many transactions have you done?
- Have you participated in crypto airdrops and ICOs?
- Do you engage in crypto mining activities?
- Do you own multiple wallets and exchange accounts?
- Do you receive payment for services in cryptocurrency?
- How long have you been a crypto tax accountant?
Most of these events are considered taxable events. So, you’ll want an experienced crypto CPA who knows how to properly document and account for these transactions.
All Cryptocurrency Transactions Are Considered Taxable Events
The IRS considers most transactions involving cryptocurrencies to be taxable events. However, there are some exceptions. This is important to note during a crypto tax prep as it could affect your final tax bill.
Here are different events you can consider a taxable event:
- Swapping crypto for fiat on exchanges.
- Receiving payments in crypto.
- Trading one crypto for another.
- Earning crypto from staking or mining activities.
- Exchanges goods and services with crypto.
- Getting crypto from an airdrop or hard fork.
The following are non-taxable events.
- Buying and holding crypto using fiat.
- Receiving or giving crypto as a gift.
- Transferring crypto to another wallet you own
- Donating crypto to a non-profit.
Knowing the different types of taxable events can help you determine the best crypto tax service for you.
How To Choose A Good Crypto Tax Service?
There are several things to look at when choosing a crypto tax accountant. Here are some tips to keep in mind:
Hiring an accountant with extensive experience in the crypto industry can be beneficial. An expert crypto CPA has seen it all, so they know which transactions are taxable and which ones aren’t.
If you’re looking for a crypto tax accountant, make sure they understand the latest tax laws. You don’t want to hire someone who doesn’t fully understand the current rules.
A reputable company will have a history of providing quality work. Look for reviews online to see if others have had positive experiences working with them. Or you can ask them directly through social media channels.
Some tax and accounting firms charge more than others. The best way to determine whether an accountant’s prices are fair is by comparing its rates against other firms. You should also check if they offer a complete package, including crypto tax accounting, preparation and filing. Don’t forget that often you get what you pay for. Lesser experienced and lower credentialed tax preparer like H and R Block, “do it yourself” software like TurboTax and “non-crypto specialized” accountants may charge a lower fee.
On the surface it may seem like a bargain and that you’re winning the game by getting your crypto accounting and tax preparation done at a low cost. However, it’s unlikely such low-cost options will have the in-depth knowledge, years of expertise or put in the extra effort to help you lower your crypto tax burden. Therefore, you could save “X amount” in accounting and tax preparation fees, but lose 2-5 times that amount in potential tax savings through experience and expertise in legally applying cryptocurrency tax law to cut-your-crypto tax.
Choosing a crypto accountant or CPA isn’t easy. There’s a shortage of cryptocurrency tax professionals to help you. Ask friends, family and others who have crypto activity for recommendations if you’re unsure where to begin. Then, use our guide above to learn about different types of crypto transactions and their potential tax implications.
Results Tax Accountants or ResultsTaxAccountants.com is a cryptocurrency firm that offers reasonable rates for high level crypto tax accountant services like crypto accounting and tax preparation services.
Mark Robert is a Crypto tax accountant and founder of Results Tax Accountants. His blog at www.ResultsTaxAccountants.com/blog gives free info to help you cut-your-crypto tax. The firm specializes in helping small business, individuals, those who need cryptocurrency consulting, tax and accounting services. He’s on a mission to help individuals and businesses eliminate tax and accounting headaches, stress and reduce their total tax burden.