What was your journey into cryptocurrency like? What initially caught your attention and why?
As a tax professional, I try to anticipate new trends within my industry. I became aware of the challenges and opportunities of crypto taxation late in 2018, and began an intensive process of learning everything I could about the tax issues and consequences of crypto at that time.
When did your firm begin offering crypto accounting as a service? What specific services do you offer to crypto clients?
I began to offer crypto resolution and tax preparation services in January of 2019. I offer both resolution work and reporting, as well as full service tax preparation and reporting.
What are the top three mistakes you see crypto clients make when it comes to accounting?
The biggest mistake I see is the lack of understanding of the power of the IRS to identify crypto traders, and to aggressively pursue those who fail to report their transactions. The second mistake I have observed is the myriad of exchanges that individuals use, and the ability to get accurate reports of all of their crypto activities. The third mistake I have observed is the lack of routine tracking of assets to make sure the accounting is accurate.
What are the top three challenges when it comes to accounting for crypto?
The main challenge with crypto accounting is the lack of standardization in the reporting of crypto transactions. While the major exchanges are quite easy to download and report, many of the lesser exchanges are not as predicable in their reporting schemes. The second challenge is on the user end. Many of the crypto traders fail to understand the various sources of revenue they receive and the reporting requirements of each. Finally, while the two-factor security processes of most of the exchanges are quite good at securing the data for their clients, they make it difficult for the tax accountant to extract the data apart from the live interaction of the client. It would be preferable as the exchanges could provide a one-time key that would allow the tax professional to extract the information they need, without needing the two factor-verification.
What's the future of crypto accounting?
Crypto accounting will grow to be a mainstream activity within the next three to five years. It is a highly specialized activity at the present. However, as the industry matures, it will become more standardized.