Cryptocurrencies are trillion-dollar technologies that are taking over the global financial system with more and more investors starting to use them as assets. These currencies operate as virtual coins that are exchanged on decentralized computer networks via virtual wallets. All crypto transactions are recorded publicly in ledgers that are protected with blockchain technology. Bitcoin and Ethereum are the most popular cryptocurrencies found globally. When making an investment in digital assets like crypto, one must stay aware of crypto taxation regulations and remain compliant proactively. Nowadays, most investors engage with crypto bookkeeping services to get the maximum use of their investment.
What are Digital Assets?
In the past, when one hears the phrase ‘digital assets,’ properties such as photos, documents, videos, audio, animations, or illustrations come to mind. Nowadays, digital assets are based on blockchain or similar technologies. The IRS defines digital assets as anything of value that is stored on a blockchain.
Whether you are a business owner who just started investing in digital assets or a trillionaire seeking more opportunities for growth, deciding whether to invest in a crypto accounting firm to manage your digital asset finances is not a simple decision. Most often, beginners of crypto trading forgo this service with the aim of saving their earnings. This is quite unfortunate considering how digital asset accountants can help you grow your potential revenue by providing strategic direction.
Signs You Need a Digital Asset Accountant
If you are unsure about the crypto tax reporting requirements, that’s your first sign to hire a professional experienced in digital asset accounting to ensure compliance and accuracy in filing taxes. Reporting requirements vary in each jurisdiction. Therefore, it’s advisable to hire an NYC crypto bookkeeper who is familiar with New York crypto tax laws.
Did you know that a majority of crypto investors who choose to hire digital asset accounting services do so since they work with different types of digital assets? Each type of digital asset may fall under different categories when it comes to tax regulations. A digital asset accountant has expertise in dealing with all types of digital asset transactions.
Sometimes, crypto investors who have already hired general accounting firms to manage their traditional finances assume that they are on the right track. However, if you are still managing your crypto holdings using outdated tracking methods like basic spreadsheets instead of a proper crypto ledger system, there is room for error. A crypto accountant or a crypto bookkeeper from a trusted crypto accounting firm can help you overcome these challenges by planning your taxes accurately.
What’s more, accounting for cryptocurrencies is a time-consuming process. This is more applicable for crypto miners and stakers who trade across multiple exchanges. Getting expertise and strategic advice from a crypto accountant can make every minute count.
As crypto regulations tighten, the chances that you might face a financial audit also increase. Without standardized crypto accounting processes, facing a financial audit can become a nightmare.
Many crypto investors who neglect accounting for cryptocurrencies often regret their decision when it’s already too late to rectify the issues. If your in-house accounting team doesn’t understand how to keep records of crypto transactions for crypto tax reporting, it’s time to seek professional guidance for digital asset accounting.
IRS Regulations for Digital Assets
According to the tax rules put in place by the IRS, digital assets are treated as property. This means that any sale, exchange, or income earned from them is taxable. When reporting capital gains from selling crypto or payments received in digital currencies, accurate reporting is essential to avoid penalties. This makes accounting for cryptocurrencies more important than ever. Digital asset accounting services, offered by a crypto bookkeeper or a crypto accountant with expertise in virtual currencies, can play a crucial role in helping you navigate the complexities and ensure success in your financial ventures.
