Staying Crypto Tax Compliant with Professional Crypto Accounting Services

More and more businesses are integrating digital assets such as crypto and tokens into their portfolio nowadays due to the transparency and security these services offer compared to traditional currencies. Since cryptocurrency is a digital asset that is decentralized, businesses can offer their clients the privacy they wish for in terms of acquiring personal information while ensuring transparency of all crypto transactions at the same time via blockchain technology.

As such, the network of cryptocurrency users in the business landscape is widely expanding and so is the need for crypto tax compliance and accounting services. Let us explore the key strategies that your business can use to ensure compliance, mitigate tax liabilities, and maintain accurate financial records.

1. Tracking and Recording Transactions

One of the main strategies used by crypto tax accountants for crypto tax compliance is maintaining detailed records of each crypto transaction that your business engages in. This is because every crypto transaction creates a potential tax event, whether it is buying, selling, trading, or using crypto for purchases. When recording crypto transactions for crypto bookkeeping purposes, accountants include details such as transaction dates, asset prices, fees, and the cost basis. Blockchain accounting tools are used by crypto tax accounting firms to track transactions smoothly and accurately.

2. Determining the Right Cost Basis Method

Crypto tax compliance and accounting for businesses that engage in crypto trades frequently involve choosing the right cost-basis calculation method that is the most advantageous for taxable gains. The IRS allows either FIFO (First-In, First-Out) or LIFO (Last-In, First-Out) methods for calculating cost basis. If your business holds crypto assets with long-term capital gains, FIFO is more beneficial. LIFO, on the other hand, is more advantageous for active traders, as it helps minimize gains by assuming the highest-cost assets are sold first. Your crypto tax accountant will determine the best cost basis method depending on your business’s financial plan and crypto bookkeeping records.

3. Leveraging Tax-Loss Harvesting

One would say that the volatility of crypto assets is a disadvantage for businesses due to the tediousness involving crypto tax reporting. However, the same volatility can be strategically advantageous for tax purposes. Crypto tax accountants apply tax-loss harvesting so that your business can sell off underperforming assets to record capital losses. This, in turn, offsets capital gains from other transactions and reduces the overall tax burden considering how the IRS allows up to $3,000 of net capital losses to be deducted against ordinary income each year, with additional losses to be carried forward to future years.

However, certain rules apply. You can’t repurchase the same asset or a similar one within 30 days before or after the sale of your underperforming assets if the trade was done for tax-loss harvesting. Therefore, it is important to hire crypto tax compliance and accounting services so that your business follows these strategies properly without harming your business’s future.

4. Using Professional Crypto Accounting Services

There are many strategies that your business can apply to mitigate tax liabilities while staying compliant. However, crypto accounting management should be done efficiently by crypto tax experts who are proficient in both tax and blockchain accounting since crypto tax regulations change rapidly.

Specialized crypto tax services, like those offered by our team at OnChain Accounting, can guide your business in maintaining compliance with tax laws while managing records and preparing financial statements. Contact OnChain Accounting today for a free consultation and discover how your business can stay ahead in the crypto world with a proactive approach to crypto tax compliance and accounting.