There’s no denying that taxes are an annual burden that many Americans have difficulty navigating. The same can be said for cryptocurrency taxes, especially since cryptocurrency is already a complicated subject with many nuances. While it’s incredibly frustrating to think of your hard-earned crypto gains ending up in the pockets of the IRS, there’s no way to avoid this issue.

With that being said, using a crypto tax accountant is an easy way to help investors like you minimize your tax burden and ensure accuracy. Here’s how working with one of our crypto tax accountants can reduce your taxes.

How Do Cryptocurrency Taxes Work?

The IRS considers cryptocurrency to be a form of property, meaning it’s subject to both capital gains and income tax. In the case that you sell, trade, or buy goods with your cryptocurrency, you’ll need to pay capital gains accordingly. If you receive income in the form of cryptocurrency, you’ll also be subject to income taxes on those earnings.

The Benefits of Using a Crypto Accountant

Selecting the Proper Account From Which to Trade

Using the right accountant is a simple way to ensure you receive the right tax benefits. For example, selling your capital assets in an IRA means you won’t have to pay a capital gains tax until your earnings are withdrawn if the account is set up and maintained properly.

While most IRA custodians don’t provide the opportunity to invest in crypto, you can instead set up a self-directed IRA or 401k to store your cryptocurrency investments as well as precious metal or real estate investments. Individuals who meet certain income level requirements are allowed to contribute $6,000 annually to all IRAs, including self-directed IRAs. 

Tax Minimization Strategies

Crypto tax accountants know all of the tax minimization strategies that can cut down on your cryptocurrency taxes. For example, they will closely track and compile detailed records that allow for specific tax ID lots such as highest in, first out.

Tax loss harvesting is another method of decreasing your tax bill. It is the practice of intentionally selling your cryptocurrency at a loss to help you claim your tax savings. Cryptocurrency is particularly advantageous in tax loss harvesting as it doesn’t follow the ‘wash sale rule.’ This means investors can sell cryptocurrencies, claim the capital loss, and buy back their tokens 30 days before or after the sale. 

Ensure Transactions are Taxed Properly 

Filling out the tax forms properly is half the battle when it comes to cryptocurrency taxes. Forms include 8949, 1040 Schedule D, and 1099-MISC, all of which your accountant can fill out on your behalf. Not only will a professional fill out the forms for you, but he or she will also ensure each transaction is taxed at the proper rate.

Contact Founder’s CPA for More Help!

Our team is here to answer all of your cryptocurrency questions and guide you through every step of the process. Sign up for a free consultation to see why over 150 startups and small businesses rely on our services every year!

Curt Mastio
Post by Curt Mastio
Dec 1, 2023 2:16:13 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.