Questions to Ask a Crypto CPA Before Engaging

Cryptocurrency investors, both new and seasoned, can benefit from engaging with a crypto tax CPA to assist with the filing of their cryptocurrency taxes. Whether you’re holding your assets for the long-term or you prefer day trading, there is no shortage of complexities when it comes to filing your cryptocurrency taxes.

When selecting a crypto CPA to handle your transactions, it’s important to first determine their level of expertise. Here, we’ll cover common questions an expert crypto tax CPA should be able to answer.

Regulatory Agencies

You’ll first want to gain an understanding of how well your crypto tax CPA stays on top of the most up-to-date news from regulatory agencies. This is of the utmost importance as the cryptocurrency landscape and related regulations are constantly shifting. It’s critical you engage with a professional who is on top of the latest regulatory changes.

Questions you can ask to ensure this person is up to date with the latest regulations include:

How does the IRS treat crypto for tax purposes?
Does the IRS tax staking as income?
If I earn cryptocurrency rewards through my credit card, are those rewards taxable income?
Is wrapping cryptocurrency a taxable transaction?

These are critical questions that qualified crypto tax CPAs should know. Failure to understand these standard yet complex regulations can lead to incorrect tax filings.

Tax Liability Calculations

Once you have reasonable assurance that your potential CPA has sufficient knowledge of cryptocurrency tax law, you’ll next want to inquire about their use of software in the process of filing your cryptocurrency taxes.

While not essential, cryptocurrency tax software greatly enhances the cryptocurrency tax reporting process. These software options can do everything from assisting in reconciling your transactions to ensuring none of them are missing. They can also generate different tax reports based on different cost basis scenarios. This is essential as changing the cost basis method for your tax lots can drastically change the tax liability that’s due. You’ll want to engage with a crypto CPA who is familiar with the software in addition to the cost basis methods that the IRS allows.

Questions you can ask your crypto tax CPA to ensure they are using appropriate software in the crypto tax liability calculation include:

Does the software used allow for the calculation of tax liability scenarios using different cost basis methods?
Does the software offer any reconciliation tools to ensure no transactions are missing and all necessary information for each transaction is present?
Does the software include any features or alert capabilities to flag transactions with potential errors for review?
Does the software generate the necessary back up / detail to support tax filings?

These tools greatly reduce the risk associated with an incorrect filing and a less-than-optimal tax liability calculation.