Why You Need a Crypto Tax Specialist, and How to Find One 

Whether enthusiasts have been busy yield farming or simply dollar-cost averaging (DCA) into Bitcoin, everyone is liable to taxes. And in 2021, global regulators are keeping a closer eye than ever on the emerging crypto space.

Crypto-specific tax software is a great first step, but a professional accountant is likely your best bet for more advanced operations.

Awareness surrounding cryptocurrencies has grown significantly over the last decade.

Digital currencies are now on the radar of governments worldwide, leading revenue collectors to publish new guidelines on taxing the emergent asset class. In recent years, this has extended to contacting leading cryptocurrency exchanges to track their customers’ activity and including crypto-specific questions on tax return forms.   

But while government bodies have taken clear steps towards taxing cryptocurrencies, many specific details remain opaque.

That’s one of the reasons a specialist accountant can be a help to cryptocurrency users who need to file their tax returns.

As the space has grown, so too has the demand for certified public accountants who understand the sector’s intricacies. Since the advent of Bitcoin in 2009, many new crypto-related activities have emerged. That also means more taxable events apply to those involved for enthusiasts.

Investing, trading, mining, staking, yield farming, airdrops—depending on where you live, you could be liable to taxes if you’ve engaged in any of these activities. 

As a rough guide, capital gains tax applies to trading and investing, while income tax is typically charged for activities that pay regular earnings, such as mining and staking. 

However, taxes differ considerably depending on where you are in the world. For instance, if you live in Denmark, you could be charged 42% on your capital gains. But a short flight away in Switzerland, no such tax applies. 

Due to the various nuances that apply to taxing crypto activities, it can be advantageous to work with an accountant who can clarify your liabilities. Unlike many traditional accountants, crypto tax specialists are trained in identifying the differences between trading and staking and how taxes may apply. 

The rates crypto tax accountants charge largely depend on the service required.

For instance, if Alice wants help working out her liabilities for her monthly buys of 0.1 Bitcoin over the last year, she’ll likely need a less bespoke service than Bob, who has traded thousands of dollars worth of Bitcoin daily since 2016 and participated in multiple yield farming pools over the summer of 2020. 

Let’s clear something up.

We know exactly what these things mean:

– yield farming
– impermanent loss
– yoloing into something
– apeing into something
– getting rug pulled
– being a degen
– based
– mooning
– wen tokyo
– few understand
– alpha leak

Does your accountant?

— TokenTax (@TokenTax) September 20, 2020

These services are usually tailored around filing forms such as the Form 8949 and Report of Foreign Bank and Financial Accounts (FBAR) through to auditing guidance.

Costs range from under $100 for basic access to software and up to $2,000 or more for consultations, in-depth data collection, and direct filing of relevant documents. 

Before you approach any specialist, there are a few things you should consider. 

Start by keeping a record of all your trades and activity, and keep it updated. Being prepared will help and could save you thousands of dollars if you stay on top of things. 

When consulting any accountant, it’s critical to check how knowledgeable they are. A crypto accountant should know the difference between activities like liquidity mining and trading and how taxes may apply to each. 

Similarly, experience with filing an FBAR can be important, especially if you hold accounts on multiple cryptocurrency exchanges. 

You could also find out how in-depth their service will be and the data they’ll require. 

If any of your questions raise concerns or it becomes clear that crypto isn’t their area of expertise, it could be worth looking elsewhere. 

It’s advisable to leave enough time to get your filing sorted. The U.S. tax year begins in January, with payments due in mid-April—stay organized and avoid leaving the legwork until the last minute. 

Today there are multiple services offering bookkeeping and assistance with crypto taxes. CoinTracker, TaxBit, and TokenTax are just three examples of reputed companies with a track record in the crypto space. 

But just as you should when considering any investment, do the necessary research and decide whether a crypto tax accountant is for you before committing to anything. 

Disclaimer: Nothing included in this article should be considered tax advice. Please consult your tax professional for specific questions about your tax status and liabilities.