Most accountants strive to attract high net worth clients that require high value tax advisory services. Rather than churning through returns, you can think through strategic ways to reduce your client's tax liability across many different assets.
The cryptocurrency market has undoubtedly minted many new millionaires. While some haven't reported these gains, many crypto investors are interested in staying on the right side of the law. The problem is that there aren't many accountants with expertise in the space and the tax laws surrounding cryptocurrencies remain murky at best.Let's take a look at how accountants can take advantage of these dynamics and add crypto services to their practice.
Why Crypto Clients Are Valuable
Cryptocurrencies have grown from a small research project in 2008 to a multi-billion dollar market over the past decade.
More than 15 million Americans have bought and sold cryptocurrencies, according to the Global Blockchain Council. Despite the crypto market downturn, Coinbase added eight million new users between July 2018 and July 2019, bringing its total to 30 million users since its launch in 2012. It's clear that people remain interested in the market.
Coinbase User Growth - Source: Alistair Milne
At the same time, the IRS issued more than 10,000 "educational letters" to taxpayers that may have been reporting transactions involving virtual currencies incorrectly or not at all. The agency then released new crypto guidance that expanded on Notice 2014-21 issued several years ago. These dynamics have created demand for crypto accounting solutions.
Crypto clients may also be more profitable than conventional clients since they require additional tax forms and there could be an opportunity to upsell them on tax planning services. For instance, you could provide tax loss harvesting advice to help crypto clients reduce their tax liability by periodically selling losing positions to "harvest" their losses.
#1. Develop a Robust Prospecting Strategy
Most independent accountants generate business through referrals. For example, you might work with a financial advisor or request referrals from your existing customers. Others start with a larger firm before branching off on their own, build up connections through religious or civic organizations, or rely on digital marketing campaigns.
Many of these same strategies apply to crypto clients:
- Reach out to local financial advisors involved with crypto investments to setup referrals that go both ways.
- Network at local crypto events where your target market may be congregating on a regular basis, such as a MeetUp.
- Publish your crypto expertise on your website and marketing materials to make it clear that you're a specialist.
As with any prospecting efforts, the key to success is being organized and consistent with your outreach. Salesforce is a great way to keep track of potential leads and ensure that you're following up with them. You can even send targeted crypto-specific newsletters to leads that expressed interest in the space to demonstrate your value to them.
In addition to in-person prospecting, you might want to consider expanding your reach beyond your immediate local area. You could try leveraging digital marketing campaigns to reach new audiences or participate in online forums where crypto investors and enthusiasts are active. The lack of qualified crypto experts means many individuals may consider distant options.
#2. Use the Right Tools to Streamline Processes
Aggregating crypto transactions across different wallets and exchanges may sound like an accountant's nightmare. At the same time, it's difficult to keep up with the latest IRS guidance and best practices surrounding the calculation of capital gains. And then, there's the issue of air drops, hard forks and other one-off events that can cause uncertainty.ZenLedger's CPA Suite makes it easy to manage all of your clients in a single location, aggregate their transactions, automatically calculate capital gains/losses and even pre-fill IRS Forms 1040 Schedule D, 8949, FBAR and others. Most of the manual data entry and processing is fully automated to let you focus on the higher value tax planning services that matter.
ZenLedger Screenshot - Source: ZenLedger
Unlike other tools, ZenLedger also develops a robust audit trail and makes it easy to demonstrate how calculations were made if the IRS requests more information. There's no "black box" that makes it difficult for you to understand what's happening and the latest IRS guidance is always baked into the calculations to ensure that they're as accurate as possible.
#3. Become a Community Resource
The final step is becoming more than just an accountant that knows how to handle crypto transactions — you should strive to become a thought leader in the space to set yourself apart. The goal is to generate more in-bound leads, eliminate the need to prospect and focus on clients that are the right fit for your business rather than trying to make payroll each month.
There are many ways to become a thought leader:
- Speak at local crypto events about tax-related topics.
- Hold local workshops for crypto enthusiasts or investors.
- Publish content on a blog or in industry magazines.
At the same time, it's important to keep up-to-date with the latest developments in the fast-moving space. There are several accredited courses available to accountants to brush up on crypto, as well as magazines and blogs focus on the industry. It's imperative to keep up with these developments in order to effectively communicate with potential clients.
The Bottom Line
Cryptocurrencies have transformed from a niche hobby to a multi-billion dollar asset class. While the market has been volatile, there are no signs that consumer interest is slowing down. The launch of new crypto assets and improvements to existing cryptocurrencies could accelerate their adoption among both investors and consumers over time.Accountants looking to capitalize on these trends can take several steps to build their presence in the space and attract more profitable clients. Using ZenLedger, it's easy to automate away a lot of the data entry and processing and focus on high-value tax advisory services to help clients minimize their tax liability and keep most of their crypto profits.