The Biggest Reasons You Need a Crypto Tax CPA for Your Tax Filings
If you’re like many savvy investors and business owners, you likely invested money into cryptocurrencies over the past year. As the 2021 tax season is only a few months away, you may not be fully prepared for the intricacies that surround cryptocurrency tax filings.
Taxes aren’t everyone’s favorite subject but keeping tabs on your digital currencies, their gains and losses is critical for a smooth tax season. From crypto early adapters to investors, traders, and miners, our crypto tax CPA experts are fully equipped to help you with your filings this year and beyond.
Here are only three of the reasons to consider hiring an expert to help with this year’s cryptocurrency tax filings.
Information Reporting Issues
While your 9-5 employer will automatically issue your W2 ahead of every tax season, this is not the case for cryptocurrency transactions. Third-party exchanges such as Coinbase will not automatically issue you a 1099-B or keep tabs on your gains or losses, meaning this is something you’ll need to do on your own.
These third-party exchanges only help facilitate your trades—they don’t have the necessary information to calculate the gains or losses on each trade. On the other hand, crypto tax CPAs can provide an in-depth analysis of your tax obligations to ensure that you’re compliant with the IRS’ reporting requirements.
Taxpayers Must Report All Activity & Calculate Taxes Owed
Every cryptocurrency transaction needs to be properly documented to keep track of gains and losses. If you’re consistently making trades, you’ll need to accurately report all itemized transactions, something that not many people know how to do.
The right crypto tax CPA can compile all of your transactions and calculate the taxes owed, putting this information on the 8949, the tax form used to report your cryptocurrency income. All short-term and long-term gains with cost basis amounts will be carefully documented in this form and submitted on your behalf.
Must Use Aggregator Tax Tools
Cryptocurrency aggregator tax tools such as Cointracking.info make it easy to aggregate your cryptocurrency trades across all platforms to accurately track and record cost basis amounts, holding periods, and taxable gains. Aggregator tax tools may seem straightforward to use but they have nuances that only a crypto savvy CPA can help you with. Like most tools, the software is only useful if you know how to use it properly.
The reason why these tools are needed is because exchanges don’t share cost basis and other information with one another. For example, if you bought 1 BTC on Coinbase for $40,000 and transferred that BTC to Kraken at a later point in time, Kraken does not know what you paid for that 1 BTC nor when you bought it. This makes it impossible for Kraken to know how to report your gains or losses to you if you sell that BTC at a later point in time. They simply do not have the information needed to do so accurately.
Instead of paying for a costly annual subscription, you can turn to a reliable and seasoned cryptocurrency tax CPA for hands-on guidance navigating these platforms. The best part? You know your results will be compliant with the IRS.
Start Working with Founder’s CPA Today
We know that cryptocurrency taxes often come with a host of questions regardless of the experience level of the investor. This is where our team of skilled CPAs can assist you with every step of the cryptocurrency tax filing process.
With over $500 million in tracked cryptocurrency to our name, 50+ businesses and individuals helped, and 100+ assets supported, there’s no better team than Founder’s CPA! For additional information and a risk-free consultation, we encourage you to get in touch with us today.