What was your journey into cryptocurrency like? What initially caught your attention and why?
I started in crypto in August 2017 by reading an article that said cryptocurrency owners weren’t paying taxes on the crypto gains, and I thought it would be interesting to learn more about this topic. I then attended local meetups and did a lot of reach to understand what bitcoin was and how I could help others involved in it. From there, bitcoin slowly but surely increased in popularity, which brought me a lot of clients asking questions about taxation.
When did your firm begin offering crypto accounting as a service? What specific services do you offer to crypto clients?
I began offering services in the summer of 2017, and was turned down just as quickly. Many individuals involved with crypto at that time didn’t care, nor wanted to pay taxes. More recently, exchanges have decided to become more complaint with AML and KYC policies, so it may not be as easy to hide any more. In addition, more tax-compliant investors have entered the market, so the need for my services rose dramatically in the fall and winter of 2017. I offer crypto ledger composition and preparation, tax consulting, tax preparation and general accounting. I have serviced clients all over the world, in countries such as Australia, Ireland, Portugal and even Japan. It’s been an amazing experience.
What are the top three mistakes you see crypto clients make when it comes to accounting?
Top three mistakes I see crypto clients making:
1. Not having the data from all of the exchanges. Missing data puts “holes” in the ledger which cause the calculations to be off.
2. Not providing all of the information upfront. Missing data can be very obvious in a ledger, which causes me to spend more time getting the information.
3. Not being knowledgeable about tax laws. Under current tax laws, trading during a bull market can cause an unexpected tax bill. Similarly, trading under a bear market can cause an unexpected capital loss, which under current tax law, a loss deducted on the return is limited to $3000 USD per year. If you want to play the game, know the rules upfront to avoid unnecessary surprises.
What are the top three challenges when it comes to accounting for crypto?
In essence, the top three mistakes translate into the top three challenges for crypto. As a tax practitioner, it gets complicated and time-consuming not having all of the data provided from a client. My easiest clients have been clients who have data from all of the exchanges and hardware wallets and present it the first time. And of course, as a practitioner, I don’t like giving my clients bad news, such as a huge tax bill, or that their net loss is limited. I do my very best to educate my clients and provide them with all of their options, which hopefully makes the blow easier to handle.
What's the future of crypto accounting?
The IRS is expected to update guidance on taxation, which would be a welcome change. The government is aware that crypto is here to stay, so I expect more regulations to follow. I am excited to see how this all plays out, but either way, I will be here to assist clients who need me and my services to make sure the IRS doesn’t come knocking at their bank account.