The crypto industry has grown tremendously over the past decade, moving from a hobby project to a trillion-dollar asset class. As crypto becomes more ubiquitous, CPAs must keep up with the evolving landscape and equip themselves with the knowledge and tools necessary to provide valuable services to their clients.
In this article, we’ll delve into why CPAs should specialize in crypto, discuss the challenges they may encounter, and explore the resources available to help them navigate the ever-changing industry.
Why Specialize in Crypto
One in five Americans has invested in, traded, or used cryptocurrency, according to a 2022 NBC News poll, including half of the men between 18 and 49 years old. As their popularity has grown, cryptocurrencies and related digital assets have become a $1.2 trillion market. They’re even becoming a meaningful part of many investment portfolios.
In addition to its status as an emerging asset class, cryptocurrencies have become increasingly popular for consumer transactions. Zippia estimates that 2,300 businesses in the U.S. accept cryptocurrencies, including 28% of U.S. small businesses. And this translates to over $1 million spent daily on goods and services.
The complexity of crypto transactions means that many individuals and small businesses may need assistance with bookkeeping and taxes. The demand for crypto expertise could become even more acute as the IRS cracks down on underreporting crypto taxes. As a result, there’s a growing opportunity for CPAs specializing in crypto.
Moreover, as governments and regulatory bodies continue to issue new guidance, the legal and tax environment surrounding crypto assets will become increasingly complex. CPAs that establish themselves early in the cycle could benefit from tailwinds down the road while positioning themselves as trusted advisors to their clients.
How to Handle Ambiguity
The IRS treats cryptocurrencies as property from a tax standpoint. While that takes care of simple cases, the agency hasn’t provided clear guidance for more complex transactions – such as decentralized finance (DeFi). While most CPAs will prepare a crypto return, crypto-savvy accountants can help their clients optimize their returns.
It’s also worth noting that crypto returns tend to be time-consuming for CPAs without relevant expertise. For example, they may need to aggregate transactions across different CSV files and manually look up the cost basis for each transaction using historical data. Fortunately, those in the know have better solutions (see next section).
The situation is even more complex for crypto businesses. Fortunately, the FASB provided more explicit guidance for accountants in October 2022, saying companies should measure crypto assets using fair value accounting. In particular, businesses should record gains and losses in the current period’s comprehensive income.
While the IRS and FASB offer some guidance, the crypto landscape still needs clarification. The IRS still needs to address issues like whether wrapping a token is taxable or whether tokens created through proof-of-stake transactions are taxable. Unfortunately, the FASB guidance doesn’t cover non-fungible tokens (NFTs) and asset-backed tokens.
Crypto Tools & Education
The good news is that CPAs have access to a growing number of tools and resources to help deliver better services to their clients.
ZenLedger’s CPA Suite makes it easy for accountants to expand their practice and earn more revenue. After connecting a client’s wallets and exchanges, the platform automatically computes their capital gain or loss and generates relevant tax forms (e.g., Form 8949). And you always have a complete, defensible audit trail at your fingertips.
The ZenLedger platform takes a conservative approach to handle DeFi, NFTs, and other complex crypto tax situations. That way, you can assure clients they are paying what’s due without overpaying their taxes. You can also use ZenLedger’s tools to identify tax loss harvesting opportunities and other ways to optimize a client’s tax bill.
In addition to tax software, CPAs have many opportunities to take CE courses diving into specific parts of crypto. For example, the AICPA offers a Blockchain and Virtual Currency Implications for Tax course that begins with foundational topics and moves into the application before culminating with a regulatory perspective for well-rounded guidance.
Expanding Your Client Base
Crypto knowledge and tools can better serve existing clientele and attract new clients that require crypto-focused accounting services. For example, crypto traders may need help reporting their taxes, crypto-focused startups may need crypto-focused bookkeeping or compliance help, and traditional companies may need guidance on adding crypto.
There are several ways to set your practice apart:
- Share Knowledge – Write blog posts or articles covering crypto taxation, accounting, or compliance topics. Participate in crypto conferences, webinars, or networking events by providing tax-related information to the attendees. These efforts can help establish authority and attract potential clients.
- Offer Resources – Provide free guides, checklists, or webinars to help potential clients understand the complexities of crypto accounting and taxation. In addition, free consultations are a great way to showcase expertise and demonstrate value.
- Use Cutting Edge Tools – Leverage cutting-edge tools, like ZenLedger, to simplify the tax preparation process and identify ways for clients to save on their taxes. More reporting and advisory capabilities in the crypto space can help set a practice apart from competitors offering basic services.
By proactively marketing crypto expertise, CPAs can expand their client base and create a niche for their accounting practice in the growing industry to help ensure that the practice remains relevant in the rapidly-evolving space. And teaching is always an excellent way to reinforce knowledge and stay on the edge of new developments.
The Bottom Line
The increasing adoption of cryptocurrencies and their integration into various aspects of life and business has made it imperative for CPAs to embrace the emerging asset class. By specializing in crypto, accountants can tap into the growing demand for expertise in the space, help clients navigate complex situations, and ultimately optimize their returns.
If you’re interested in learning more, consider trying the ZenLedger CPA Suite to streamline your crypto operations and take one of the many CE courses available for a more in-depth understanding of the space.
“This material has been prepared for informational purposes only and should not be interpreted as professional advice. Please seek independent legal, financial, tax, or other advice specific to your particular situation.”