Being a qualified accountant doesn’t necessarily mean that you are great at managing crypto assets. The truth is that crypto accounting needs an entire set of evolving skills and knowledge. It’s unlike the typical CPA, you know. You will find that even if you toe the legal line, without crypto expertise, CPA alone won’t help maximize your crypto investments. .
To an accountant who’s new in the crypto world, this article is for you. We hope to clarify the following before moving forward with your investments.
Spreadsheets Won’t Cut
Human errors not only makes spreadsheet accounting a problematic task but make crypto accounting daunting. Its common knowledge, the rapid rate at which digital currencies fluctuate in value, often in hours. Also, different coins sell differently depending on exchange and country of residence. As these numbers change, accountants somewhere are struggling to keep pace.
Don’t assume it’s all well after emailing your accountant on the crypto purchases. Talk to them as often as possible on the tools available that can help manage your assets correctly. The volatility of the crypto market demands constant communications and intelligent automation rather than just the regular manual entry.
Cost Basis Is Tricky
Cost basis on a crypto asset reflects the price at purchase time. It gets tricky when you trade a coin for another and a headache when reconciling the diverse crypto investments and IRS demands.
Track your purchase prices carefully by keeping your accountant up to date with every purchase. It will ensure you won’t need to go hunt for information. You could look up the information later but remember, exchanges have been shut down.
Given the uncertainty, it’s vital that you keep all your numbers in one place, including your tax information, which brings us to our next point-the taxable.
Everything Is Taxable
Sales and purchases are not the only taxable events in crypto. Every transaction event is taxable regardless of how the deal went. And forgetting a short crypto activity period, deliberately or not breaks a chain that is difficult to repair. That’s why you need to be in constant communication with your accountant.
Treat crypto like the asset it is. It doesn’t matter whether you made or lost money; crypto movements change the value of your holdings.
Big Banks And Crypto
Banks are still in control of world money, though they are yet to figure out what to do with cryptocurrencies. You see, the existence of cryptocurrencies conflicts with that of banks and financial institutions with which virtual currencies are meant to disrupt. And that’s another point your accountant needs to understand – the limitations banks have regarding crypto assets.
Ultimately, both will need each other to survive. Crypto needs inclusion while banks need to keep pace with consumer demands. A long term compromise would be highly welcome, but it’s not so at the moment. So, until then, make sure the accountant understands how you can use your crypto assets.
Crypto Still Isn’t Money
At least not yet. IRS classifies crypto as property, not money. Hence the basic concepts of capital gains and losses apply as the governing rules regarding the same do. It’s important for your accountant to tread carefully with the value of the digital property.
The activity of mining crypto is itself a business. You could deduct the mining expenses. Acquired crypto is a business income in the form of property. A good accountant will always have room to learn new things. .