Accounting in crypto currencies like bitcoin is challenging especially for those having no prior experience of dealing with assets like stocks and bonds. Evasion on crypto currency tax is not a way thus it is important to file tax properly on any capital gain. The steps for the procedure are as follows:
- Record the transactions- keep detail records of transactions which involve the use of crypto currency. These transactions include crypto-fiat trades, crypto to crypto trade and other.
- Calculate your loss and gain- to check out the loss or net capital gain for the tax year calculate the gain or loss made from the transactions. Also calculate for short term and long term loss as well as gain.
- Determine tax rate- check where do you fall in income tax bracket so that you can apply the tax on your capital gain. Calculate the same for net capital gain.
- Handle tax loss- other gains can be offset for your net capital losses so check for such losses. Moreover, these losses can be forward for future offset tax on losses.
Properly file your tax and use these steps to minimize the taxes on your gain or losses. This will let you analyze the tax loss for the current tax year and how you can overcome or offset that for tax liabilities on your income without disturbing your portfolio. This strategy helps you in making up for the years when the rate of crypto currency is low.
Now, here are the tips to find crypto tax return accountants. The research should be thorough and deep as not all accountants are capable of handling transactions and tax related to this new mode of transactions. Moreover, the firms that offer accountant services are also not much experienced so it is essential to rely on few tips to get a professional accountant. A certified professional accountant is good to seek their help but also check for agents who are IRS enrolled.
But to check for CPAs focus on four key areas. These are as follows:
Very few people include crypto currency transactions in their taxes which makes the accountants less familiar with these types of taxes. They must have experience on assets like bonds or stocks but when it comes to crypto currency there are few differences and ambiguities. Thus, an expert in respective domain is required to handle these transactions.
Ask few questions to the accountant which are as follows:
- Ask them about tax returns that have prepared in the past
- Ask for any specialization like certificates or training in crypto taxes
- Ask for the outline of the experience they have in prepared crypto returns
- Ask if IRS have audited any of their clients in the past years for crypto tax returns
The best way to check their expertise in crypto accounts is to ask how they will help their clients in a certain scenario. Also, ask about crypto tax law and advice related to topics such as tax loss harvesting.
In case you are hiring tax return accountants check for referrals from family, friends or business colleagues. You can check for referrals from those in a local crypto community. In case you are checking an accountant online ask directly from the references given on the site. In this case online reviews of the clients proved to be useful. However, they can be forging as well so be careful while believing on their words. Another good option is case study.
Customer support comes handy for tax planning and preparation. Your CPA or tax return accountants must be proactive and responsive to the clients in case IRS needs more information. In few cases the IRS may opt for an audit so accountant must provide support to their clients during audits. If you are dealing with a remote accountant then responsive communication is must between clients and accountants. A CPA agent must offer multiple ways to contact them during emergency. Moreover, the support to the customer should be reliable, speedy and low-cost.
Simple tax return preparation is usually cheap but crypto tax return is expensive. Ask to the accountant whether they charge by page or hour. This should be reasonable in case you have multiple trades. Moreover, if you come prepared by filling the tax forms on your own then the cost can be reduced.
A DIY approach
Different software is developed to simplify the process of tax filling for crypto currency transactions. Check out for that software in case you want to do it on your own. Here few features must be checked such as
- Integration of wallets and exchanges
- Important forms such as IRS form 1040 schedule D and form 8949
- Forks and payments
- Tax loss harvesting options
- CPA integration
Various accounting firms come up with packages to cater the different need of clients. Must check for the bookkeeping services they offer in packages. Also check how a particular package is different from another one.
More importantly, ask questions mentioned above to ensure that you get right services and support from the tax return accountants.