A Simple Guide for Accountants to Crypto Tax Planning Strategy | CPT PPP Coverage

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In the past few years, the Cryptocurrency industry has turned out to be a ‘pot of gold’ for investors trying to multiply their gains. Consequently, it has become extremely essential for financial accountants to make sure they help their clients with a proper crypto tax planning strategy.

If you are trying to figure out how to go about it, then here is an easy guide for accountants to prepare their clients for crypto tax planning.

Our guide for crypto tax planning is a one stop blog to answer what is a crypto tax plan, why is it necessary for tax accountants to know about crypto tax planning. We shall also cover some basic tips on how to discuss crypto activities with clients. Without further ado, let’s go about it..

What is a Crypto Tax Plan

Crypto tax plan is a strategy that makes sure that any cryptocurrency investments or trades are appropriately reported  on taxes. Thus, with the help of a proper crypto tax planning, accountants make sure that any applicable taxes are fully and legally paid.

No points for guessing, from a taxation point of view, there are certainly many similarities between traditional investments and cryptocurrency investments. However, there are also particular differences between them.

One of the key differences between crypto investments and traditional investments is that cryptos are slightly riskier given the fact they largely remain un-regulated. However, with proper research, you can invest in cryptocurrencies that can help you with long-term growth.

Why is it necessary for tax accountants to know about crypto tax planning?

As an accountant, one must know the regulatory norms for cryptocurrency transactions. With cryptocurrencies getting widely adopted and used for trading and investments, it has become a source of tax evasions too. Thus, Internal Revenue Service and Tax officials have started taking actions on investors and traders not reporting income from these sources.

Last year, the Indian Government had levied a 30% tax on gains earned from digital assets. Thus, one might have to face legal consequences, if they fail to pay crypto tax. Hence, it’s important for accountants to be aware of crypto taxation to make sure that clients duly report their taxes.

Some points to keep in mind while developing a crypto tax plan

It is imperative to know if a client has invested in crypto or holds any digital assets. In case, they had some crypto exposure previously, then it is equally necessary to know if they have included crypto in their prior returns.

Tips on how to discuss crypto activities with clients

Depending on the above mentioned points, we have come up with our two cents that can help accountants to discuss crypto activities with clients.

• It is important to know a client’s past crypto activities, so that all filing requirements are duly met. This will help clients to avoid penalties or interest dues.
• Clients must also be educated about crypto reporting norms attested to particular cryptocurrencies, so that they can honestly disclose all taxable events related to that token.
• An accountant must educate clients on short-term and long-term consequences on crypto in terms of profit and losses. This will help clients to make informed decisions.

Takeaway

With all the aforementioned steps, accountants and the clients too can have a safe experience in crypto trading and taxing. This implies that the clients will also be saved from any penalties or legal infringement. Although, no investment is safe to play with, but if one has to, then it is always better to play by rule!