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How to pick the right crypto tax advisor to help you

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best crypto tax advisor

When Congress urges IRS to issue guidance on something, you know it is real.  Crypto investors have been feeling the pain of not having clarity around tax frameworks.  In response to Congress’s appeal, the IRS said it would issue the guidance sometime this year.

If you are one of those savvy taxpayers, who are comfortable with using crypto tax software to report your own crypto tax transactions, you can head straight to our article on Comparison of Best Crypto Software.

If you received the IRS tax notice, letter 6174, 6174-A or 6173, then read our article on what these letters mean and what you should do here: What to do if you receive the IRS Notice Letter 6173 or 6174

Whether you have received the IRS Tax Notice Letters or you want to avoid them in the future, and if you don’t want to face the IRS alone, you should consider hiring a good crypto tax advisor.

How can anyone be an expert without guidance?

Many believe that the IRS has not yet issued any definitive guidance (as of the writing of this article) on virtual currency transactions.  How can any tax advisor be a crypto tax expert without such guidance?

IRS Notice 2014-21 talks about virtual currencies to be treated as property and that all of the property tax rules apply to virtual currency transactions.

That means the excuse of inadequate guidance will not help you in the tax court. 

crypto tax guidanceThe recently issued IRS Letter 6173 specifically challenges taxpayers who have not reported their crypto transactions from 2013 through 2017.  The logic behind those specific years (even though bitcoin has been in existence since 2009) may be that the IRS Notice 2014-21 is considered valid guidance to report virtual currency transaction, and this was made available in 2014 (which means guidance for filing 2013 returns with crypto tax transactions was available in 2014).

Few taxpayers have taken the position to use the Like-Kind exchange treatment on their virtual currency transactions.  This was thrown out of the door with The Tax Cuts and Jobs Act, which limited Like-Kind Exchange treatment to real estate transactions.

As you can see, things can get complicated quickly.

It makes logical sense that one would seek expert advice to deal with such complicated tax matters.  The question is, how do you pick the right crypto tax expert who knows what he/she is doing when it comes to helping you with crypto tax reporting or dealing with IRS Crypto Notices?

Do not despair.

We have put together a list of things you should look in a crypto tax advisor:

Experience & Expertise

Crypto tax AccountantThis one sounds quite lame. Of course, you want an experienced crypto tax expert. Yes, but a lot of tax accountants have avoided clients with crypto tax transactions until a few years ago.  For this specific reason, you want to ask your advisor how long they have been serving clients with crypto tax transactions.  In our opinion, anything less than three years does not confer enough experience for them to be called an expert.

Size of their crypto clientele

How many taxpayers do they help with crypto tax transactions in a year?  You cannot call yourself an expert if you help a few taxpayers, who all had transactions in a single Coinbase account. In fact, Coinbase itself provides tax reports to taxpayers trading on their platform, so any tax accountant, even the one with no experience, can report those transactions without breaking a sweat.

That’s why finding out the size of their crypto client base is important. If they have dealt with numerous taxpayers, there is a greater chance that they have seen the variety and complexity.

Have they helped their clients with FinCEN requirements?

Even if you have never opened an account outside the U.S., it is always a good idea to check to see if the crypto tax advisor you are considering has a general awareness and experience about the crypto FinCEN requirements.

This gives you an additional level of comfort that you will not have to look for a new crypto tax advisor if you deal with foreign crypto exchanges in the future.

You want to pick the crypto tax advisor who’s not only suited for your immediate needs but probable future diversification.

Do they have insight into the State legality of crypto transactions?

crypto accountant professionalWhile the IRS may have issued some guidance on crypto taxes, not all States have accepted the legality of crypto transactions.  Some states may have imposed limitations on its residents to take part in crypto transactions.

While you have to disclose all of your transactions for both Federal and State purposes, you also have to make sure you are not tripping any legality issues in your State of residence.

Does your crypto tax advisor know the specific issues concerning your State?

Do they have their own crypto tax transaction tool?

crypto tax softwareHow do they report the crypto tax transactions?  Do they rely on Excel spreadsheets, or do they have their own software that enables you to connect your transactions from the exchanges?

While having their own crypto tax transaction tool is not required, find someone who has the knowledge of how APIs work and how to pull information from different exchanges.

If you are among the U.S. individuals with transactions with Coinbase only, then you may not need to check this ability of your crypto tax advisor as coinbase provides easy to use Form 8949 format reports.

However, if you have dealt with more than one exchange, find a crypto tax advisor who can pull the information through APIs from various exchanges.  This will ensure that you are not scratching your head to pull the data from various sources.

Some commercial crypto tax software allows for a tax accountant module where the individual taxpayers can connect their crypto exchange APIs without having to purchase separate logins.

How is their reputation in the market?

Do a quick search with the last name to ensure that the individual you are dealing with has appropriate credentials.  You can start off with this IRS Database Search.

You want to ensure you are dealing with someone who has the credentials to represent you in front of the IRS (or tax authority in your respective jurisdiction).

Are they on any board to help the crypto space?

Crypto accountantIf you are among the taxpayers with a vast amount of crypto transactions, you might want to find the crypto tax advisors who are actively working with the authorities in building the framework for crypto taxes. The reason for this special consideration is that with 10,000s of transactions, you will have all sorts of transaction types (sale, spend, losses, bankrupt projects that you invested in, change in accounting method, amending prior year returns and so on) and some of the transactions may need special guidance.

When the tax advisor that is helping you is connected in the right places, they can get you the widely accepted methodologies to apply to your situation.

Shop around to find expertise without burning your pockets

search for best accountantSometimes, you don’t have to spend big bucks to get professional help. The easiest way to avoid burning a hole in your pocket is to shop around. Perform a basic search of local accountants in your area and ask around if they have expertise in crypto tax transactions.

Use the checklist below.

cryptotrader-tax-checklistWe hope that this article has helped you in picking the right crypto tax advisor.

Stay in the know by subscribing here.

Thank you for reading the article.

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All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.Subscriber-FatcaIMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

Read more about the author here.

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All Roads Lead to $100K Bitcoin: Various Perspectives that Support $100K BTC

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Bitcoin to 100K

Bitcoin to 100K

There are a lot of theories in the crypto space that argue that Bitcoin will reach $100,000 before the next halving.  Some even argue that we could reach that price point before the end of 2021.

Here we have compiled a few perspectives that support a higher price point for Bitcoin.

IF we missed any, please let us know and we will be glad to add it for others to read.

Bitcoin’s ability to reward savers

If you saved $100,000 throughout 2017, today its value would have been $94,000, a total loss of 6% due to inflation. That is without considering the fees and hidden charges that institutes charge.

Even if you invested in the S&P 500 for 12 months at $8333 each month throughout 2017, your portfolio value today would have been $110,000.

If you saved $100,000 in Bitcoin throughout the 2017 (prices ranged from $920 through $14,000 during Jan 2017 through December 2017).  For the purposes of this comparison we are using the last week prices from each month as available on Coinmarketcap historical snapshots.

$100,000 invested in equal amounts throughout 2017 would look something like this.

Bitcoin to 100K

Since 2017, Bitcoin price has crashed and rebounded.  At the lowest point of the crash of $3000 per bitcoin, your portfolio value would have been $144,000.

In today’s average price of $16000 per bitcoin, your $100,000 savings would have been worth $770,000.

Due to its increasing demand and reducing supply, Bitcoin is expected to reach $100,000 in the next 4 years. Some models show that bitcoin will be worth $1 Million by 2030.

Only time will tell us whether bitcoin reaches these prices or not, but point being, no other asset of any class has crazy growth predictions like Bitcoin has.

Stock-to-flow ratio

According to Plan B, Gold had the highest stock-to-flow (SF) ratio of 62.  That is, it will take 62 years to produce the gold that is currently in the market.  In other words, you cannot willy-nilly inflate the supply in a year or two due to how scarce gold is and how difficult it is to find and mine it.

Current SF for Bitcoin is 25, however, by the end of 2020 or 2021, this could jump to 50.  By the next halving in 2024, Bitcoin could surpass the SF of gold.

According to Plan B, “The predicted market value for bitcoin after May 2020 halving is $1trn, which translates in a bitcoin price of $55,000. That is quite spectacular. I guess time will tell and we will probably know one or two years after the halving, in 2020 or 2021. A great out of sample test of this hypothesis and model.”

However, following the trajectory of Plan B’s SF analysis, Bitcoin could easily reach $1 Million dollars by 2030, according to some commenters.

Stimulus and unlimited printing of fiat

COVID has exposed another flaw in the fiat system.  It is that governments can print as much money as they wish whenever they wish to do so.

Whenever governments resort to simply print money without having a basis in asset value or growth in GDP, it erodes the value of the fiat in circulation.

This is what happened to Argentina, Venezuela, Zimbabwe and more.  

The US dollar has lost over 99.97% value since 1900.  For instance, whatever you could buy with $1 in 1900 will need $31 today.

COVID has added salt to the wound for fiat.  It exposed the blatant fact that governments can and will print money to their whim without regard to the inflation and impact on savers.

This increased supply in fiat helps stock market and market liquidity which in itself helps people who are invested in the stock market and other vehicles which is generally the wealthier part of the society.

Other factors strengthening the crazy Bitcoin price predictions

  • Institutional FOMO, for instance, Square, PayPal, Grayscale, etc., entering the market
  • Easier onboarding of new retail investors
  • Greater technologies and DApps being built on Bitcoin 
  • Great DeFi services to lend and borrow money
  • Globally accepted single denomination that does not need to be converted in the future (with enough places accepting bitcoin)

What other factors do you think will contribute to Bitcoin’s shooting past the $100,000 barrier?

Let the FOMO begin…

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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Crypto Roundup: All Your YouTube Influencers in One Place

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Crypto Roundup

Visit our Crypto Roundup section daily for a dose of all your favorite Crypto YouTube influencers in one place.    

Worried about missing updates from your favorite YouTube crypto influencers?  

Welcome to the Crypto Roundup.  

On this page, we will post a quick summary of the videos from some of the most popular YouTube crypto influencers.

Ivan on Tech  Altcoin Daily

Crypto Zombie Box Mining

Ellio Trades Lark Davis

Data Dash Bitboy Crypto

MMCrypto Chico Crypto

Altcoin Daily

Video title: Bitcoin Will Be OVER $20,000 By Christmas 2020! BIGGEST WEALTH SHIFT OF OUR LIFETIME! Cryptocurrency

Date: 19-Nov-20

  • World’s biggest wealth shift of our lifetime is happening right now and no mainstream media is talking about it, except CNBC.

  • Preston Pysh predicted on August 26th that: “Bitcoin should be reaching its all time high by Christmas.”

  • If you are looking to buy a dip, there may not be one.
  • Ricardo Salinas Pliego, a mexican billionaire, has just revealed that 10% of his liquid assets are into bitcoin.

Lark Davis

Video Title: STOCKS HIT NEW HIGHS! WILL COVID VACCINES LEAD TO MEGA PUMP IN 2021? [Are You Ready?]

Date: 19-Nov-2020

  • Stock markets and bitcoin pumps higher on the news of the second successful covid vaccine.
  • There could be more chances for the new stimulus. Means more inflation, more debt and simultaneously pumps stocks, gold and bitcoin.

Crypto Zombie

Video Title: BITCOIN $18.5k TOP!!?! DON’T BE FOOLED!! HODL FOMO BEGINS!!! $TRILLIONS FLOOD!!

Date: 18-Nov-2020

  • Overall sentiment of Bitcoin has changed drastically from ICO craze in 2017 to a time where people are FOMOing to own more bitcoin.

Ivan on tech 

Video Title: BIG WARNING TO ALL HODLERS!!!!!!!!! DO NOT GET REKT!!! BITCOIN $18,500 REJECTED – NOW WHAT?

Date: 18-Nov-2020

  • Ivan expects bitcoin to shoot past $20K resistance before end of this year, giving it 85% probability

Chico Crypto

Video Title: World’s Most Powerful Turn BULLISH on BITCOIN

Date: 19-Nov-2020

  • All those who hold big bags of Bitcoin will come out of the shadows to talk up the Bitcoin rally, a $20K bitcoin could be on the cards before the end of this year
  • Ethereum mining could act as a big catalyst for Ethereum’s price
  • Big companies like google could play a bigger role in mass adoption of crypto

Let the FOMO begin…

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Lessons from the Veteran HODLERS to the Newbies!

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Lessons in Crypto

For all those who entered the crypto market after the 2017 bull run – here are few lessons from the HODLERS from the last bull run(s).

This is our attempt at making all you newbies aware of the mistakes veteran cryptoers did.

Let’s get started…

Don’t FOMO in to all the hype

FomoIt’s hard not to FOMO in crypto.  The trick is to make sure you don’t lose your shirt in crazy bets.  Always limit your bets to what you are comfortable losing.

The common ways you can become victim of FOMO are:

  • Following your favorite YouTuber without actually doing your own research on the project.
  • Investing into projects at the top.
  • Believing in promises of 100x or 1000x without any substance behind those claims.

HODLing far too long

Remember why you are into crypto – to make the money.

Never fall in love with your crypto, and HODL the tokens even when they are 10x and more.

Have a strategy to take your capital out before you become a HODLer.  

If you believe the project really has what it takes to go beyond 100x and more, just sell in instalments so as to not miss the ride.

One of the best ways to HODL is to take your capital in full and profit in tranches.

This rekt story will give you a right perspective of what it looks like, it’s one of many:

Don’t put all your eggs in one basket

Never go all in on one project. No matter how strong the project may look, even the projects with strong fundamentals don’t do well sometimes. 

And, you will be kicking yourself watching other projects go up and your portfolio just doesn’t seem to make a move.

And don’t over do it and have a portfolio with over 100 projects either. It is very difficult not to have invested in more than 15 projects but anything less than 20 is a good way to go, in our opinion. 

Put aside the share of Profits for Taxes.

One way you can get a good night’s sleep is by paying taxes. 

Always keep a habit of putting aside a % of your profits in USDT or other stable coins, as a reserve to take advantage of market volatility and also to meet your tax obligations. 

Exchanges are more evil during bull run

Foreign ExchangesDon’t trust exchanges. Yes we already know that, but they play more games during bullrun, some intentional and some technical. 

Many exchanges tend to go under maintenance when the prices shoot up too high too soon (Coinbase?), and you can’t sell. 

And the shady exchanges scam out before you know.

Regulators seem interested when the market cap of these projects goes through the roof, which then adds FUD around the project crashing the prices.  

Exchange may freeze funds pending investigations when such issues arise.

Take for example OKEx. Users are unable to withdraw their assets from the exchange for almost a month now, not certain if they ever will, and all that started with the legal dispute.

Never fall for Arbitrage gains

Arbitrage is when you buy in one exchange at a lower rate and sell on the other for a higher rate to take some profits. 

Some shady exchanges show a lot higher prices than the other genuine exchanges and when you deposit your assets to sell at those prices there won’t be actual volume to execute the trade. You may be stuck with either a high fee for withdrawal or other funky rules to take your own money out. 

Remember, there is no free Giveaway

Free CryptoScammers rise with the rising market.  

When the crypto market buzzes with all time highs – scammers cash in big time on newbies.

The most lucrative scam in crypto is ‘Free Giveaway’. Whether it be through YouYube ads or discussion groups and wherever they can get your attention.  Read this article on various sophisticated scams that are being deployed.

We hope these lessons help you through your trades and crypto life.  Stay safe and always DYOR.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

Continue Reading

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