A comprehensive guide for cryptocurrency investors on working with a crypto tax accountant in 2024 to properly file taxes and maximize deductions.
Do You Need a Cryptocurrency Tax Accountant in 2024?
Welcome to the most comprehensive guide on the internet for cryptocurrency investors and traders on whether you need to hire a crypto tax accountant in 2024.
With the complex and evolving cryptocurrency tax rules, many crypto investors get overwhelmed when it comes time to file their taxes. Getting expert help from a cryptocurrency tax accountant can save you time, money, and major headaches.
This in-depth blog post will cover:
- An overview of the cryptocurrency tax rules for 2024
- The key benefits of having a crypto tax accountant
- Exactly how a cryptocurrency tax accountant can help you
- Tips for working with a crypto tax accountant
- What to expect to pay for a crypto tax accountant
- How to choose the right tax accountant for your crypto taxes
- And much more!
If you own cryptocurrency, this blog post is a must-read guide to understand if you should hire a crypto tax professional to handle your 2024 taxes.
Cryptocurrency Tax Rules in 2024
In 2024, cryptocurrency tax rules remain complex with some grey areas, especially around things like staking rewards, airdrops, and DeFi protocols. Here’s what crypto investors need to know about crypto taxes for 2024:
Overview of IRS Cryptocurrency Tax Guidance for 2024
The IRS first issued guidance on crypto taxes in 2014, treating virtual currencies as property for tax purposes. This means:
- Selling crypto for fiat is a taxable event and capital gains/losses need to be calculated
- Exchanging one crypto for another is also a taxable event (i.e. selling ETH for BTC)
- Any use of crypto to pay for goods/services should be reported as income
The IRS recently asked Congress for additional resources to crack down on crypto tax non-compliance. Expect increased enforcement and auditing around crypto taxes going into 2024.
Tax Forms Needed for Reporting Crypto Activity in 2024
The main tax forms used for reporting cryptocurrency activity are:
- Form 8949 – Used to report crypto capital gains and losses
- Schedule D – Attaches to Form 1040 and sums capital gains/losses
- Form 1040 – Primary tax return listing crypto income or deductions
- FBAR (FinCEN 114) – Required if you hold crypto in foreign exchanges
You may also receive Form 1099-K or other tax forms from crypto exchanges you use. A crypto tax accountant can ensure you file all required reporting forms.
Capital Gains vs Income Tax Treatment in 2024
- Short-term capital gains – You held the crypto for under 1 year before selling. Taxed at ordinary income rates up to 37% for 2024.
- Long-term capital gains – You held the crypto for over 1 year before selling. Taxed at 0%, 15% or 20% for 2024 depending on income.
- Income – Crypto received from mining, staking rewards, airdrops, or payments for goods/services is taxed as ordinary income at rates up to 37% for 2024.
As you can see, properly classifying crypto activity is crucial to minimize taxes owed. A crypto tax pro can optimize your returns to take advantage of lower long-term capital gains rates.
Benefits of Having a Cryptocurrency Tax Accountant
Hiring a cryptocurrency tax accountant provides some major benefits, especially with the complex reporting requirements. Here are the top reasons to have a crypto tax pro prepare your 2024 returns:
Expertise in Complex Cryptocurrency Tax Calculations
Between exchanges, DeFi protocols, NFTs, and company stock received as crypto, tracking basis and capital gains can get extremely complex. A crypto tax accountant has experience handling all of these scenarios to calculate taxes accurately.
Help Maximizing Tax Deductions and Credits
A cryptocurrency tax accountant looks for legal ways to maximize your deductions and credits to lower your tax liability. For example, they can help you optimize:
- Harvest tax losses by strategically selling crypto at a loss
- Contribute to retirement accounts like 401k or IRA
- Take advantage of tax deductions like business expenses
Audit Defense If Your Tax Returns Are Questioned
With the IRS ramping up crypto tax enforcement, the odds of being audited if you are non-compliant are increasing. A crypto tax accountant serves as your audit defense, ensuring your returns hold up if questioned by the IRS.
How a Cryptocurrency Tax Accountant Can Help You in 2024
So exactly what can a cryptocurrency tax accountant do to make tax time less stressful? Here are some of the key ways they help crypto investors:
Accurately Calculate Capital Gains and Losses Across Exchanges
One of the biggest pain points is tracking capital gains and losses when you use multiple exchanges and wallets across different blockchains. Your accountant can integrate your transaction history from all sources to get unified gain/loss reporting.
Prepare Complex Tax Reporting Forms Like 8949, Schedule D, FBAR
Properly filling out cryptocurrency tax forms like Form 8949 for capital gains/losses or FBAR for foreign assets requires specific expertise. Your crypto tax pro handles these complex reporting requirements for you.
Review Your Tax Returns For Accuracy Before Filing
Before you file your 2024 tax returns, your cryptocurrency tax accountant reviews the completed returns to spot any errors and ensure everything related to your crypto activity is reported properly. This gives you peace of mind.
5 Tips for Working With a Cryptocurrency Tax Accountant
To make the tax preparation process smooth, here are some important tips for working with your crypto tax accountant:
1. Provide Your Complete Transaction History From All Exchanges & Wallets
This includes every taxable crypto event across all centralized exchanges, wallets, DeFi protocols, NFT marketplaces, and anywhere else you use crypto. The more transaction details you provide, the more accurate your capital gains reporting will be.
2. Be Honest About Any Cryptocurrency Income Sources
You must report all crypto income sources like staking rewards, mining, airdrops, and crypto payments for goods/services. Your crypto tax accountant needs full information to report your crypto activity properly.
3. Ask About Making Quarterly Estimated Tax Payments
If you expect to owe $1,000 or more in taxes for 2024, ask your accountant about making quarterly estimated payments to avoid underpayment penalties.
4. Inquire About Their Record Keeping Practices for Audit Defense
Ask how your accountant keeps documentation and records to defend your returns in case of an audit. 7 years of records are recommended by the IRS in case they have questions.
5. Request References From Past Cryptocurrency Clients
A reputable crypto tax accountant should be able to provide references from satisfied clients they’ve prepared returns for in the past. This assures you that they have legitimate expertise in crypto taxes.
What Does a Cryptocurrency Tax Accountant Cost?
When budgeting for a crypto tax accountant, what can you expect to pay? Here are some guidelines on crypto tax prep costs:
- For individual returns, fees often range from $200 – $500+ depending on complexity
- Business returns for crypto companies can range from $1,000 – $5,000+
- Bundled pricing is common, with a fixed fee for federal/state returns
- Some accountants charge hourly rates ranging from $150 – $300 per hour
- Additional fees may apply for audit representation or amended returns
Factors impacting costs include your location, size of your crypto activity, the reputation of the accountant, and whether you need add-on services.
Reputable crypto tax accountants are worth the investment given the peace of mind, time savings, and potential money savings from reduced taxes and penalties.
How to Choose the Right Cryptocurrency Tax Accountant for 2024
Not all tax pros are equal when it comes to crypto taxes. Here are some tips for choosing the best cryptocurrency tax accountant for your needs in 2024:
Look for Key Credentials Like Enrolled Agent (EA) or CPA
You want a knowledgeable crypto tax pro. Opt for an Enrolled Agent (EA) or CPA who have passed exams and met IRS requirements.
Ensure They Specialize in Cryptocurrency Tax Preparation
Ask how many years they’ve prepared crypto returns and the percentage of their client base that involves crypto taxes. You want an accountant focused on crypto taxes, not just general income taxes.
Get Referrals From Other Cryptocurrency Investors
Reach out in crypto communities or your network to get recommendations for crypto tax accountants others have used successfully. This can help you find a specialist.
Review Their Online Presence and Credibility
Before retaining a crypto tax accountant, review their website, social media, client testimonials, and online reputation. This gives insights into their expertise.
Ask About Their Continuing Education in Cryptocurrency Tax Rules
Given how rapidly crypto tax rules change, make sure your accountant regularly takes continuing education courses to stay updated on the latest IRS guidance for crypto.
By following these tips, you can find the ideal cryptocurrency tax accountant to leverage for your 2024 tax preparation.
Conclusion: A Crypto Tax Accountant Saves You Time, Money, and Stress
Filing your cryptocurrency taxes yourself can be extremely complex, time-consuming, and risky if you make mistakes. The tax rules combined with tracking your crypto transactions across multiple platforms can create major headaches at tax time.
Hiring a cryptocurrency tax accountant provides specialized expertise, reduces your tax obligations through optimized reporting, and gives you peace of mind that your returns are filed completely and accurately. They save you significant time and stress trying to DIY your crypto taxes.
For most crypto investors, the relatively reasonable fees for a crypto tax accountant are well worth it. Just make sure to find an experienced professional who specializes in cryptocurrency tax preparation.
The 2024 tax year is right around the corner. Now is the ideal time to start working with your cryptocurrency tax accountant to get your crypto activity organized, maximize your deductions, and develop a tax minimization strategy specific to your crypto holdings.
Taking the time to hire a crypto tax pro sets you up for worry-free tax preparation and the lowest legal tax bill. Contact a qualified cryptocurrency tax accountant today to get started!
