Read Time: 6 minutes

Hey, Crypto Tax Pros!

Ready to tap into a $7.5 billion market?

Yes, you read that right. The crypto tax market is booming, and the potential for growth is staggering. Let's break it down quickly:

For the 2021 tax year, 6.6 million people answered "yes" to the virtual currency question on Form 1040.
With the trend continuing, we project about 15 million people will check "yes" in 2023.
If even 10% of these need professional crypto tax help, that's 1.5 million clients.
With an average fee of $5,000 for specialized crypto tax services, the market size is an astonishing $7.5 billion.

Don't miss out on this golden opportunity to expand your practice and significantly increase your revenue.

In this issue, we'll guide you through the essentials to quickly establish yourself in the crypto tax niche. By the end of this read, you'll be equipped with the basics of crypto and digital assets, know how to choose the right software, and understand the importance of building a proficient team. Ready to kickstart your journey in the crypto tax world?

Let's dive in!

Step 1: Grasp the Basics of Crypto and Digital Assets

Starting your journey in crypto taxation requires a firm grasp of the fundamentals.

You need to familiarize yourself with different digital assets, their transactional uses, and how funds move in various transactions.

Here are some practical ways to learn the basics:

Tip #1: Hands-On Experience. Set up a crypto wallet, fund it with a small amount of ETH, and engage in common transactions such as:

Swapping one cryptocurrency for another
Providing liquidity to a decentralized exchange (DEX)
Staking ETH on LIDO
Purchasing an NFT

Tip #2: Enroll in Free Online Courses. Platforms like Metamask Learn and Coinbase Learn offer valuable insights into the crypto world's complex jargon and concepts.

Tip #3: Consult Authoritative Resources. Reading professional guidelines ensures you stay aligned with industry standards. Start with the AICPA's Accounting for and auditing of Digital Assets practice aid and Deloitte's Tax positions on crypto transactions.

With a solid foundation in place, it's time to choose the right software for your practice.

Step 2: Select the Right Crypto Tax Software

Choosing the right software is crucial for an efficient practice.

Consider these essential features when evaluating different platforms:

Integration Capabilities: Avoid software with limited integrations, as it can lead to manual data entry and errors. Choose software that seamlessly connects with various exchanges and wallets for efficient data collection.
Reconciliation Features: Discrepancies in transactions are common in crypto. A tool that aids in reconciliation can save significant time and effort.
Tax Planning Versatility: Ensure the software supports various cost basis methods like FIFO, LIFO, or HIFO, and can assist in tax-loss harvesting strategies.
Professional-Grade Software: Opt for software designed for tax professionals, ensuring it includes the necessary features to serve your clients effectively.

Now that your software is sorted, let's focus on building a solid team.

Step 3: Assemble and Train Your Team

A capable team is the backbone of a successful practice.

Given the current talent shortage in the crypto tax niche, finding and training the right team can be challenging but crucial.

Here's how to build a top-notch team:

Assess Your Needs: Evaluate your client load and the complexity of their cases to determine the number of employees needed and their required expertise level.
Recruit Effectively: Look beyond traditional job platforms. Engage with crypto communities on Discord or Twitter to find candidates with deep crypto knowledge. Prioritize hiring accountants with personal crypto experience to expedite the learning process.
Provide Practical Training: Hands-on experience with actual crypto transactions can give your team valuable practical knowledge. Additionally, implement a well-structured training program to guide them through your processes and procedures.

Finally, it's time to specialize and stand out as a crypto tax expert.

Bonus Step: Specialize Exclusively in Crypto Clients

Specialization is critical to standing out in the crypto tax niche.

While the idea of focusing solely on crypto clients might seem risky, it's essential to establish yourself as an expert and avoid commoditization.

Here are some effective marketing strategies:

Optimize Your Online Presence: Update your social media profiles to reflect your specialization, such as "I help crypto traders navigate their tax complexities."
Revamp Your Website: Tailor your website to address the unique challenges faced by crypto clients and how your services offer solutions.
Transition Existing Clients: Gradually phase out new non-crypto clients while maintaining stability with your existing client base.

Embracing these steps will position you as a frontrunner in the crypto tax market, equipped with the right knowledge, tools, team, and focused approach.

Ready to make a significant impact in the world of crypto taxation? Start implementing these strategies today and watch your practice thrive.

Treasury Trove of Resources

Hand-picked resources to help you dive deeper into our main story, learn crypto without confusion, and master crypto tax:

Chainwise Academy Resources (Comprehensive Resource Hub) Dive into our curated collection of guides, articles, and tools designed to help tax professionals master the crypto tax niche and stay updated with the latest industry trends.
DIY Crypto Tax Course (Online Course) We just launched our DIY crypto tax course, which has everything crypto investors and tax pros need to understand the basics of crypto taxation, effectively use the leading crypto tax software (CoinTracking), and prepare accurate crypto tax reports (without adding hours to your workload).
Crypto Tax Outsourcing: We constantly get calls from other CPA firms that don't have the capacity or desire to prepare their clients' crypto taxes but still want to help by sending them to an experienced crypto tax professional. If this sounds like you, we'd love to chat about how we can help!

Feel free to schedule a complimentary strategic partner consultation Zoom call on our calendar HERE.

Crypto Tax Pro Tip Of The Week

Earlier this week, I had a call with a prospect who started in crypto 6-7 years ago. His CPA refused to prepare his tax return due to unfamiliarity with crypto. So, he stopped filing his tax returns altogether.

Now, he's realized the gravity of his mistake.

He came to us, desperate to fix six years of unfiled returns.

This scenario isn't uncommon. Many tax professionals avoid handling crypto, leaving clients in the dark. Clients end up not filing any tax returns, not just their crypto transactions. This leads to significant penalties and stress for the client.

As tax professionals, we must adapt and guide our clients through these complexities.

Have you faced similar challenges with your clients? How did you handle them?

Whether you're looking for a partner for hands-free crypto tax outsourcing or want to build your in-house capabilities with our expert assistance, we've got you covered with our outsourced crypto tax services for CPA firms!

Schedule a free strategic partner consultation Zoom call on our calendar HERE.

Curated Crypto News

Want to stay on the cutting edge?

Here's what else is happening in crypto tax, policy, and markets that you should know about:

🦘 Australia's Tax Office Announces Crypto Crackdown: According to Cointelegraph, the Australian Taxation Office (ATO) is seeking personal data and transaction details from up to 1.2 million cryptocurrency exchange users. This is significant as it indicates a tightening of crypto tax compliance and reporting requirements. The ATO aims to identify users who may have failed to meet their tax obligations, emphasizing the importance of accurate crypto transaction reporting.

🙅‍♂️ House Overturns SEC's Anti-Crypto Guidance, Biden to Veto: According to Cointelegraph, the U.S. House of Representatives voted to pass H.J. Res 109, a bipartisan bill overturning the SEC's Special Accounting Bulletin 121 (SAB 121). SAB 121 requires banks to hold customers' crypto assets on their balance sheets, a rule not applied to traditional assets like securities. Representative Mike Flood criticized the guidance as unfair, arguing that custodial assets are typically off-balance sheet. However, President Biden's administration has announced plans to veto the resolution, citing concerns over disrupting the SEC's efforts to protect crypto investors and the broader financial system.

🏦 Over 600 Firms Reveal Billions in Bitcoin ETF Investments: According to Cointelegraph, more than 600 firms disclosed significant investments in spot Bitcoin ETFs in their 13F filings with the SEC. Professional investment firms reported a combined $3.5 billion in Bitcoin ETFs, with Millennium Management being the largest investor at $1.9 billion. Other major investors include Morgan Stanley, JPMorgan, Wells Fargo, and UBS. This massive institutional interest underscores the growing acceptance and integration of Bitcoin into traditional financial markets.