The popularity of cryptocurrencies has exploded and they are quickly becoming one of the most popular asset classes. From tracking cryptocurrencies to paying taxes on them, there are many areas in which a crypto accountant’s expertise can help you stay ahead of the curve. 

As we noted, there are many advantages to engaging a crypto accountant. The three biggest advantages include proper tracking, using the most advantageous tax strategies, and accurate and compliant tax liability calculations.

Why Detailed Tracking Matters with Cryptocurrency

For new cryptocurrency investors, one of the most overlooked aspects is detailed tracking. The lack of detailed tracking can cause a higher than necessary tax liability calculation as could understate your cost basis amounts. Further, you may not be able to take advantage of certain cost basis calculation methods.

Each of these tax lot ID methods will create a different tax liability. In order to use the most optimal cost basis method when calculating your cryptocurrency tax liability, you’ll need to have transaction-level details. There are many software options in the marketplace that can assist with this detailed tracking. Engaging with a crypto accountant prior to selecting and implementing a tracking software provides major benefits. Not only can an accountant help in the selection process, but once selected, they can ensure all of your transaction data is properly brought into the software.

Using a Crypto Accountant to Deploy the Most Advantageous Tax Strategies

As we noted above, when paying taxes on cryptocurrency, there are a few tax lot ID methods you can elect to use. Assuming you elected to use a software to track your cryptocurrency activity at the transaction level, a savvy crypto accountant will have the ability to run multiple tax lot ID scenarios and ensure the most optimal method is selected.

A few examples of accepted methods include: 

  • FIFO (First-In-First-Out)
  • LIFO (Last-In-First-Out)
  • HIFO (Highest-In-First-Out)

In addition to selecting the optimal tax lot ID method, crypto accountants can also assist in deploying tax strategies that will help reduce your tax liability. 

One of the most notable strategies is tax-loss harvesting. In its simplest form, tax loss harvesting occurs when a cryptocurrency investor intentionally sells digital assets to realize a loss which is then used to help offset any potential capital gains tax owed.

Crypto Accountants Ensure a Compliant and Accurate Tax Liability

Last, but not least is the expertise and guidance a crypto accountant can offer when calculating your tax liability. When calculating your tax liability, there is no shortage of potential errors that could be made. 

A crypto accountant will be able to properly decipher what transactions are taxable and which are not. For example, most cryptocurrency investors are most likely not aware that cryptocurrency earned as income through credit card rewards are not taxable.

We’re Here to Help

Finding the right crypto accountant can be a challenge, and having the right team on your side can make a big difference. Before engaging with a crypto accountant we highly recommend reaching out to us! One of our experienced crypto accountants can assist in ensuring your taxes are filed in the most optimal manner.

If you have additional questions about choosing the crypto CPA, feel free to reach out to our team at Founder’s CPA for guidance!

Curt Mastio
Post by Curt Mastio
Nov 22, 2023 4:46:47 PM
Curt Mastio started Founder’s CPA in 2017 and currently serves as the Managing Partner of the firm. After obtaining both his Bachelor’s and Master’s degrees in accounting from the University of Illinois in Urbana-Champaign Curt started his career in Big Four public accounting. Shortly thereafter Curt served as the Chief Financial Officer of Storage Squad began his stint as an Adjunct Instructor at Northwestern University’s Farley Center for Entrepreneurship and has been teaching Accounting & Finance to undergraduate students for 6+ years. In his current role Curt oversees strategy, operations, and business development at Founder’s CPA. Further, Curt has experience working directly with 200+ startups and small businesses providing accounting, tax, and outsourced CFO services. His industry expertise lies in the SaaS, Blockchain, Marketplace, and Fintech industries. He has served as a key advisor working directly with startups that range from pre-revenue to companies generating over $30 million dollars a year in revenue. Lastly, he serves a key role working directly with the firm’s clients that have collectively raised over $200 million in venture capital funding to date. Curt is also an active advisor, mentor, and investor in the startup ecosystem. He has facilitated numerous workshops, webinars, and presentations to incubators and other startup-centric organizations. He is also an active mentor for Techstars in both Chicago and Iowa. Outside of his daily professional duties Curt is actively involved with Beat the Streets Chicago and was a founding member of its Young Professionals Board. His efforts in both leadership and community involvement were recognized when he was awarded the Illinois CPA Society’s Outstanding Young Professional Leadership Award in 2020. He was also a panelist at their annual conference in 2022 where he spoke about his experiences starting and operating a public accounting firm. He maintains an active Certified Public Accountant designation that he obtained in 2014. Outside of work, Curt can be found spending time with his friends & family including his dog Rufus. His hobbies include golf, boating, cooking, reading, and attending sporting events & concerts.