Cryptocurrency can result in stressful situations when it comes to filing taxes. There are so many variables in play at any given time. If you’re not experienced, it’s advisable to hire a cryptocurrency tax accountant to assist you with the process. Did you know that every single one of your cryptocurrency transactions has tax and accounting implications? Consider the fact that crypto prices can fluctuate 10% or more on any given day.

We’ve outlined some tips and best practices to make it easier on your crypto tax accountant.

Keep Records of Your Transactions

Ignoring your recordkeeping responsibilities isn’t ideal when it comes to cryptocurrencies. Many people assume that the blockchain will automatically document each transaction and its accompanying details. Instead, blockchains act as a permanent record of your letters and numbers that can be examined through a block explorer. Blockchains, however, are not people-friendly. As a best practice, you can copy and paste your transaction information into a spreadsheet that you pass onto your trusted accountant.

Only Use One Exchange

It can be tempting to use a variety of exchanges but it only introduces additional complications for both you and your crypto tax accountant. Using more prices from different sources, the more complicated your tax filing process will be. First of all, every exchange that you use has a data output in a different format. This increases the chances of errors when your accountant is combining your CSVs. In addition, this is a time-consuming and manual task that will make the process take longer and become more expensive. 

Maintain Good Wallet Hygiene

Staying on top of your wallet hygiene is very important for both experienced and novice cryptocurrency traders alike. It’s helpful to your accountant so they can better understand your workflow as they process and file your taxes. Even though it might not seem like holding your digital assets in one location is ideal, this isn’t always ideal. Make sure to keep transaction-specific wallets such as revenue, investments, and DeFi transactions. Miners should also keep a secondary wallet to hold mining rewards. 

Automate When Possible

You can also eliminate as much uncertainty as possible by using software to automate and streamline as many transactions as you can. Although it might seem like additional work up front, working ahead of time can streamline and automate as many processes as possible. As cryptocurrency becomes more popular and commonplace, there will be more accessible solutions such as software on which you can rely. 

Talk to Your Accountant Regularly

As you are tracking your activity across exchanges, blockchains, and wallets, you’ll still want to have regular and open conversations with your cryptocurrency tax accountant. Crypto taxes can quickly become complicated and time consuming, so it’s important to be transparent with your accountant and keep them updated. 

Need a Seasoned Crypto Accountant?

If you’re looking to partner with an experienced crypto tax accountant ahead of tax season, look no further than our team at Founder’s CPA. Over 150 startups and small businesses rely on our services every year. Don’t hesitate to contact us ahead of this year’s tax season to learn more about how we can help.  

Curt Mastio
Post by Curt Mastio
November 22, 2023
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.