- When to Hire a Crypto Accountant\/CPA?<\/a>
- You Make DeFi Transactions<\/a><\/li>
- You Have Useless Cryptocurrencies\/NFTs that Once Had Value<\/a><\/li>
- You Had Funds in a Bankrupt Crypto Exchange<\/a><\/li>
- You Had Funds in a Crypto Exchange that Got Hacked<\/a><\/li>
- You\u2019re a High Net-Worth Individual<\/a><\/li>
- You\u2019re Being Audited\u00a0<\/a><\/li><\/ul><\/li>
- Choosing the Best Crypto Accountant\/CPA for your Needs<\/a><\/li>
- What to Look for When Choosing the Best Crypto Accountant\/CPA<\/a>
- 1. First-Hand Experience with Crypto Investing or Trading<\/a><\/li>
- 2. Experience with Other Crypto Clients<\/a><\/li>
- 3. Strong Understanding of Different Crypto Transactions and their Nuances<\/a><\/li>
- 4. Tech Savvy<\/a><\/li>
- 5. Reliable Work History\u00a0<\/a><\/li><\/ul><\/li>
- Where Can You Find the Best Crypto Accountant\/CPA?<\/a><\/li>
- Final Thoughts\u00a0<\/a><\/li>
- FAQ<\/a>
- Q: When do I need to hire a crypto accountant or CPA?<\/a><\/li>
- Q: What should I consider when choosing a crypto accountant or CPA?<\/a><\/li>
- Q: When should I not hire a crypto accountant or CPA?<\/a><\/li><\/ul><\/li><\/ul><\/div>\n\n\n\n
When to Hire a Crypto Accountant\/CPA?<\/strong><\/h2>\n\n\n
\n![\"Hire](\"https:\/\/bitcoin.tax\/blog\/wp-content\/uploads\/2023\/05\/shutterstock_428964070-1024x1024.jpg\")
<\/figure>\n<\/div>\n\n\nBefore we talk about choosing the best crypto accountant\/CPA, let\u2019s talk about the necessity of one. Do you really need them? If yes, then when? <\/p>\n\n\n\n
While it\u2019s never a bad idea to hire a crypto accountant or CPA if you can afford to, you don\u2019t always necessarily need them. <\/p>\n\n\n\n
For instance, if you\u2019re more of a passive investor dabbling around Bitcoin and maybe Ethereum too sometimes, uses only one exchange, one wallet, and doesn\u2019t have many crypto transactions, you can easily manage taxes on your own. At most, you can use a crypto tax tool, like Bitcoin.Tax<\/a> for more convenience and efficiency. <\/p>\n\n\n\n
However, there are particular scenarios where not hiring a crypto accountant can cost you more than paying for one. Let\u2019s take a look at some of those. <\/p>\n\n\n\n
You Make DeFi Transactions<\/strong><\/h3>\n\n\n\n
DeFi transactions include borrowing\/lending crypto<\/a>, liquidity pools<\/a>, yield farming<\/a>, staking crypto<\/a>, etc. Unfortunately, most tax authorities, like the IRS and CRA, haven\u2019t released dedicated guidelines for taxation around DeFi transactions. <\/p>\n\n\n\n
The best we have is an existing framework for how crypto is taxed. Hence, navigating the tax implications for DeFi<\/a> transactions gets really tricky, really fast. <\/p>\n\n\n\n
To illustrate how messy it can get, consider this – <\/p>\n\n\n\n
When you add funds to a liquidity pool, you’ll receive a token, representing a share of the pool’s total value locked (TLV). So, while you still technically own the funds you contributed in the pool, the IRS, or the tax authority in your country, may see this as a disposal event. Therefore, a taxable event.<\/p>\n\n\n\n
And this is only one example. Add the complexity of yield farming and complicated fee structure on top, and it quickly becomes apparent why you need a crypto accountant or CPA when dealing with DeFi transactions. <\/p>\n\n\n\n
You Have Useless Cryptocurrencies\/NFTs that Once Had Value<\/strong><\/h3>\n\n\n\n
If you have useless crypto assets or NFTs<\/a> that once had value, a crypto accountant or CPA can help you use them to reduce your tax bill. Moreover, they can provide clarity on what to expect from these useless cryptocurrencies or NFTs. <\/p>\n\n\n\n
For example, there was a lot of confusion around the tax implications of the Terra crash<\/a> and if we can claim casualty losses. <\/p>\n\n\n\n
While the short answer is no (here\u2019s why<\/a>), there are a lot of similar scenarios, such as rug pulls, pump and dump schemes and failed projects, where you could use some professional help to gain some clarity, make the best move, mitigate losses and move on. <\/p>\n\n\n\n
You Had Funds in a Bankrupt Crypto Exchange<\/strong><\/h3>\n\n\n\n
When we talk about bankrupt crypto exchanges, the first thing that comes to mind is the FTX scandal<\/a>. While it\u2019s certainly made the most noise and headlines, crypto exchanges and financial institutions go bankrupt more often than you might think. <\/p>\n\n\n\n
Besides FTX, crypto firms that filed for bankruptcy<\/a> in 2022 include BlockFi, Voyager Digital, Celsius Network and more. <\/p>\n\n\n\n
When a platform goes bankrupt, users are left with locked funds that they can\u2019t access, use or sell. The fate of your assets will vary based on multiple factors, like, the country you live in, the country the company filed for bankruptcy, and ultimately, the court order. Plus, if there is an ongoing lawsuit against the company, like in the case of FTX, things will only get more complicated and delayed. <\/p>\n\n\n\n
Having a crypto accountant or CPA working with you in such times is crucial. They can help you navigate the complexities of bankruptcy, its legal and tax implications and the different options you have to lessen your losses. <\/p>\n\n\n\n
You Had Funds in a Crypto Exchange that Got Hacked<\/strong><\/h3>\n\n\n\n
In 2022, we witnessed some of the biggest hacks in crypto history<\/a>, especially a bunch of hacks in the DeFi space<\/a>. An estimated $3.8 billion worth of crypto was stolen<\/a>, making 2022 the biggest year ever for crypto hacks. <\/p>\n\n\n\n
While you can\u2019t claim losses for stolen crypto<\/a> in the US, in some countries, you can. But the catch is it\u2019s overly complicated and time-consuming. <\/p>\n\n\n\n
Hiring a crypto accountant or CPA can be tremendously helpful in this situation, as they can do all the work on your behalf and help you claim your losses. <\/p>\n\n\n\n
You\u2019re a High Net-Worth Individual<\/strong><\/h3>\n\n\n\n
If you\u2019re a high net-worth individual, you would want to deploy every strategy at your disposal to pay as less taxes as you can. Doing this on your own can be time-consuming, time that you could spend doing more productive things. <\/p>\n\n\n\n
There are also a bunch of other reasons you should hire a crypto accountant or CPA to do your taxes. For instance, the stakes are higher for you. Plus, investing in a good, ideally the best crypto accountant\/CPA since you\u2019re a high net-worth individual, can help you save 10x more than you pay. <\/p>\n\n\n\n
You\u2019re Being Audited <\/strong><\/h3>\n\n\n\n
If you\u2019re being audited, it\u2019s probably a good sign that you should\u2019ve hired a crypto accountant or CPA. To not make the same mistake twice, hire one immediately. <\/p>\n\n\n\n
Many tax authorities, like the IRS, CRA or ATO, are doubling down their resources to track crypto investors dodging their taxes. And crypto audits<\/a> are one of their key strategies to do that. <\/p>\n\n\n\n
So, if you\u2019re being audited, it\u2019s better not to take any chances since the stakes are already high and hire a professional that can guide you and provide the best probability of getting out of it without having to pay hefty fines or penalties. <\/p>\n\n\n\n
Choosing the Best Crypto Accountant\/CPA for your Needs<\/strong><\/h2>\n\n\n\n
The best crypto accountant\/CPA will differ from person to person. First, you need to identify what you really need help with and for how long, based on your current situation. <\/p>\n\n\n\n
We discussed some scenarios above where you might need assistance with your crypto taxes, but to what extent you need them might vary. <\/p>\n\n\n\n
For instance, if you\u2019re hiring a crypto accountant because you\u2019re being audited, it\u2019s probably only a one-time job, and you would need someone with a very specialized skill set. <\/p>\n\n\n\n
On the other hand, if you\u2019re a high net-worth individual, you may want to hire a crypto CPA on a full-time basis, in which case, you would look for more of a jack of all trades. Someone who can handle and file your taxes while at the same time can also advise you on reducing your tax liability. <\/p>\n\n\n\n
You can learn more about the different services provided by different tax professionals here<\/a>. <\/p>\n\n\n\n
Ultimately, it all boils down to your needs and budget. Once you figure that out, you can then move on to the following five fundamental factors that help you choose the best crypto accountant\/CPA. <\/p>\n\n\n\n
What to Look for When Choosing the Best Crypto Accountant\/CPA<\/strong><\/h2>\n\n\n
\n![\"What](\"https:\/\/bitcoin.tax\/blog\/wp-content\/uploads\/2023\/05\/shutterstock_1277988199-1024x475.jpg\")
<\/figure>\n<\/div>\n\n\n1. First-Hand Experience with Crypto Investing or Trading<\/strong><\/h3>\n\n\n\n
Would you rather learn swimming from someone who just read books about swimming but never actually dove into the water or learn from someone who’s in the water every day? <\/p>\n\n\n\n
Exactly. <\/p>\n\n\n\n
The best crypto accountants and CPAs are the ones who actively invest or trade in crypto themselves. They know all the nuances, complexities and nitty-gritty of different crypto transactions. If not, at least they are aware of it. <\/p>\n\n\n\n
Hence, having first-hand experience matters when choosing the best crypto accountant\/CPA. <\/p>\n\n\n\n
2. Experience with Other Crypto Clients<\/strong><\/h3>\n\n\n\n
As we just established, experience matters. That is why you must find crypto accountants and CPAs who specialize with crypto clients or, at the very least, have a proven track record of working with crypto clients in the past. <\/p>\n\n\n\n
This is especially important when the stakes are high and the complexity of your crypto transactions is too. For example, imagine you made a lot of DeFi transactions, and now you\u2019re being audited.<\/p>\n\n\n\n
So, hire an accountant with the necessary expertise to handle your crypto taxes and the experience to back them up. <\/p>\n\n\n\n
3. Strong Understanding of Different Crypto Transactions and their Nuances<\/strong><\/h3>\n\n\n\n
We have comprehensive crypto tax guides<\/a> for different countries. Anyone can read them and learn the basics. As a crypto CPA, knowing the basics isn\u2019t enough. <\/p>\n\n\n\n
The best crypto accountants and CPAs would have a robust understanding of different cryptocurrencies and crypto transactions with all their nuances and tax implications. They should also be fast and up-to-date with the ever-changing landscape of crypto taxes and regulations. <\/p>\n\n\n\n
4. Tech Savvy<\/strong><\/h3>\n\n\n\n
Before hiring a crypto accountant or CPA, ask them if they know how to use and operate different crypto tax tools, like Bitcoin.Tax<\/a>. It can help your accountant accurately calculate your crypto gains and losses, as well as identify any tax liabilities you may have. <\/p>\n\n\n\n
While an ordinary accountant will generally be slower, inefficient and more prone to making errors and mistakes, a tech-savvy crypto accountant can complete tasks faster and more efficiently, allowing them to focus on other areas of your taxes that may require more attention. <\/p>\n\n\n\n
- Q: What should I consider when choosing a crypto accountant or CPA?<\/a><\/li>
- 2. Experience with Other Crypto Clients<\/a><\/li>
- You Have Useless Cryptocurrencies\/NFTs that Once Had Value<\/a><\/li>
- You Make DeFi Transactions<\/a><\/li>