Different lines of work and career choices mean that some people are more experienced and knowledgeable in certain areas. Therefore, people who are actively involved in finances probably know more about investing, at least when compared to an average person who works some other job. Of course, numerous exceptions to this rule exist but more often than not this is how things work. When it comes to cryptocurrency however, it seems that more and more average people who have nothing to do with investments of other sorts nor finances and economy in general know a lot about it. Digital currencies have changed the world and they are here to stay. Naturally, everyone is interested in it because they know that practically anyone can make it with enough skill, devotion, and hard work.
However, if there is a job that guarantees you a little bit more success in the crypto industry, it would be the job of an accountant. Accountants deal with numbers and money on a daily basis so naturally they have more experience and skill necessary for smart investments and business moves. Still, there is always more to be learned and additional skills to be explored no matter who you are and how much you already think you know. Human beings are creatures of habit and unless you make learning new things a habit, you risk falling behind and being overtaken by the competition. In the article before you, we will tell you about the most important things every accountant needs to know when it comes to cryptocurrency. If you still want to know more afterwards, make sure to check out advfn.com.
Chances are you already know a lot about cryptos by now, but we still have to mention a few basics everyone has to be familiar with before we move onto the accountant specific things. Cryptocurrencies are digital assets that exist completely virtually, as binary. They are means of exchange as well as an investment on their own. They exist thanks to cryptography and complicated encryption systems that allow secure and near-complete anonymous transactions.
Since they are decentralized, no third parties like governments and banks overlook transactions and impose laws or regulations. This, apart from the security and anonymity, is the biggest advantage of cryptos over traditional (fiat) currency. No central authority controls the market and in each transaction only the two parties who are in agreement over the deal participate. The most famous cryptos are of course bitcoin, ethereum, ripple, litecoin, and a few others. As of the time of writing, 1 BTC is worth more than $54,000 and it is by far the most popular, valuable, and lucrative one to support.
What You Should Know as an Accountant
It is now time to determine the key elements every account who is considering joining in on the crypto fun has to know if they are to become successful and properly make decisions.
Property, not Currency
In most parts of the world, cryptocurrencies are considered property and not currency like regular money. This means that taxes and everything else is different and bodies like the IRS have special regulations in place. Filing taxes for it is complex and difficult, much more so than for other, more common assets you are used to.
More Coins Mean Harder Accounting
Transaction and business of more than one type of coin means more numbers to shuffle and more things to keep track of. Cost base calculation is difficult to perform for a single coin considering h ow volatile the market is, let alone if your portfolio contains a few different virtual currencies. Accounting in the world of cryptocurrencies is therefore quite hard and challenging.
Tax Software is Useful
As mentioned above, there are taxes with cryptos, contrary to popular belief. Trading generates rewards and losses in form of gains, both of which are taxable. A good piece of advice for all accountants out there is to use tax software, specialized programs and apps that filter the transactions and export them to regular software you probably use every day already.
Regularly Keep Track of the Prices
The crypto market is highly volatile, there is no denying it. What this means is that you should always be on the lookout for the changes in values of cryptos you have. Only by doing this can you react quickly enough to make a difference and earn more money with your investments. If you are too slow, you will never be able to grow your business and expand your wealth.
Everyone should be doing regular research to keep track of trends and changes on the market. As an accountant, it should come naturally to you since you know the economy and financials better than most. Study the history of the crypto you have in order to better predict its future and always be on the lookout for new things that are currently dominant.
Hobby and Business Taxes
Not all taxes are the same and transactions that are carried out as hobbies have less taxes. As a matter of fact, only half of the gains are subject to taxation if the transaction was made as a hobby. Business transactions on the other hand are subject to full taxation. Knowing this can result in you having to pay less taxes than you thought so be smart about it and utilize this feature in a smart way.
Accounting firms have to thank auditing engagements for the majority of their yearly revenue, as that is the bulk of their job. Auditing is when an accountant is reviewing the financial statements of a company and verifying the accuracy of their numbers. This is basically the actual job every accountant is doing during their average workday. When dealing with cryptos, you must pay special attention to auditing whether you are doing it for yourself or for a client. Right now, there are more than 2,000 different cryptos out there and new ones are constantly appearing. This means that there is a lot to be done if you are to start accepting crypto jobs and clients who deal with it.