As a cryptocurrency investor, you probably know that reporting crypto activity on your taxes is complicated. Even with the help of specialized tools, you could spend hours modifying transactions. And with the legal uncertainty around many areas of crypto tax treatment, you still might not feel 100% confident that you’re reporting everything correctly.
If you’re ready to save time, lower your tax bill, and gain peace of mind by using a pro, then you face a new challenge: Most tax professionals don’t understand cryptocurrency. Finding a CPA who can answer all your questions is almost as hard as reporting it yourself!
Well, you’ve come to the right place. Gordon Law‘s team of experienced tax attorneys and CPAs have focused on cryptocurrency tax law since 2014, and prepared more than 1,500 crypto tax reports.
But don’t just take our word for it—we encourage you to explore your options. Whether you’re preparing your annual tax return or defending an audit, here are 5 things to look for in a cryptocurrency tax professional.
1. How well do they understand cryptocurrency?
Cryptocurrency transactions go far beyond basic buys, sells, and swaps. With each new technological innovation, there are new tax challenges to consider.
Your crypto tax professional should stay on top of the latest trends and determine the tax treatment for new types of activity. For example, does your tax pro understand the difference between ERC-721 and ERC-1155 token standards? Do they understand the mechanics of liquidity pools? Bot trading? Ordinals?
Keeping up with these changes is practically a full-time job, so be sure to test a professional’s knowledge about your specific trading activity before you hire.
At Gordon Law, our team is passionate about crypto—more than half of our crypto tax professionals invest personally, and a third invest in DeFi. Check out our detailed cryptocurrency tax guides to learn more about specific activities:
2. Which crypto tax software do they use?
A qualified cryptocurrency tax attorney should be able to work with any software you choose: CoinTracker, CryptoTaxCalculator, Bitcoin.Tax, CoinLedger, Koinly, TokenTax, etc.
More importantly, they should have a process for dealing with transactions that the software can’t handle correctly on its own. Our clients often save thousands or even millions of dollars through accurate reporting, compared to their DIY software results!
Gordon Law gives you the ultimate flexibility:
- Whichever crypto tax software you choose, you’ll receive accurate reports thanks to our years of hands-on experience. No need to spend hours fixing your reports—it’s all handled for you!
- Not sure which crypto tax software to choose? Get personalized recommendations based on your trading activity and specific needs.
- Want to switch to a new crypto tax software? Enjoy a seamless transition with the help of our team.
3. Do they give you options for tax treatment?
The IRS has issued very little guidance about taxes on virtual currency, so tax professionals must apply existing regulations to your trading activity. Often, there are multiple ways to treat your transactions from a tax perspective.
Some of these positions are safer, meaning there’s less risk of IRS penalties. Other positions can deliver greater tax savings, but with some risk that the IRS could contest your stance.
With Gordon Law, you have control over your crypto tax bill. You’ll get a clear explanation of your options, so you can choose between a more conservative or more aggressive tax treatment whenever possible.
4. Do they help you save throughout the year?
To maximize your crypto tax savings, you need to plan throughout the year, not just in April. Here are a few ways our team helps you save:
- Tax Loss Harvesting: Around September of each year, we reach out to help you find advanced tax loss harvesting opportunities. This can be done throughout the year, as well.
- Specific Guidance on Sales, Donations, and Gifts: You may already be aware that you can lower your taxes by holding digital assets for more than 1 year, donating crypto to charity, or giving crypto as a gift. But which specific tokens will bring the most tax benefits? With Gordon Law, you’ll get crystal-clear guidance on which assets to dispose of and when.
- Puerto Rico Act 60: If you want extreme crypto tax savings, and are willing to move to Puerto Rico to get them, we make it easy to apply for Act 60 and remain compliant.
Discover more ways to save on crypto taxes here.
5. Which cost basis methods do they use?
Your cost basis method for cryptocurrency (aka accounting method) has a major impact on your overall tax bill. But beware—the IRS generally only accepts two methods, FIFO (First In, First Out) and Specific ID. There are also important changes to cost basis methods under the new 1099-DA reporting regulations.
Beware of tax professionals who promise to lower your tax bill using unsupported methods such as HIFO (Highest In, First Out). While it is technically possible to use this method, it’s a lot more complicated than you may realize, and it’s often used incorrectly.
IRS audits of cryptocurrency will skyrocket in coming years, so it’s important to use a supported cost basis method. Otherwise, during an audit, the IRS may recalculate your taxes and assess a much higher bill—with the added cost of penalties and interest.
6. How many crypto tax audits have they defended?
If you’re facing an IRS audit, you need a professional who’s experienced in IRS resolution as well as cryptocurrency tax law. Our attorneys have defended hundreds of audits, including several involving cryptocurrency.
We’ve learned that the IRS often calculates crypto taxes incorrectly, so if you’re not careful, you could end up paying more than you owe. Make sure you hire a strong defender with specific experience fighting crypto tax audits so you don’t get pushed around by the IRS.
In one recent cryptocurrency audit, our client received a $61,405 refund! With proper accounting, we showed that instead of nearly $175,000 in short-term gains, our client actually had significant short-term losses and was owed a refund.
Even if you’re simply filing your annual return, you can minimize the risk of future audits by choosing a professional who knows firsthand what the IRS is likely to penalize.
Bonus tip: Start your search early
Because qualified crypto tax professionals are few and far between, they tend to book up quickly. Even by February, it might be too late to guarantee filing by the April 15 deadline; however, you can still file a tax extension and get more time to file.
Ready to have crypto taxes done for you?
Hopefully, these considerations will help in your search for an experienced crypto CPA or crypto tax attorney. If you’d like to speak with one of the trusted tax professionals at Gordon Law, reach out today to schedule your confidential consultation. We’ve helped more than 1,000 investors like you report their crypto accurately and save on their taxes.
