Money can’t buy happiness but it can be a great help in destroying friendships. For some reason though, everyone still wants to save as much of it as possible — especially when spending it means giving it to the government in the shape of taxes.
This article is for you if…
- … even after reading the introduction above you still like money
- … you have done more than a handful crypto-trades in the past
- … you need to do a tax return for your crypto gains/losses
- … you would like to spend less money on your CPA and get better results in a shorter amount of time
Why exactly would I want to help my CPA?
A couple of reasons: One, they are human, too — and it has never been easier and economically more feasible to do your good deed of the day by unburdening your CPA of a lot of manual labor. Scout’s honor.
Two, they are usually paid hourly wages — and those are everything but cheap.
Three, there are very few CPAs who know the intricate details of crypto taxation to actually save you money. It makes sense for most small-time (and even a few big-time) investors to do a quick cost-benefit analysis: Is it more expensive to let my CPA manually optimize my crypto taxes or would it make sense to just pay the “standard” tax rate? Usually, the answer is: Just get it done ASAP, the savings generated are not worth the hours, days or weeks that a CPA spends sifting through your Binance history to find holding periods and to test different inventory methods.
The Myth of a Perfect Tax Return…
…is similar to unicorns in that they don’t really exist. You might get close, you might even think that you’ve seen one, but there is always one more dollar to save.
Getting closer to the unicorn-status has diminishing returns. The first few optimizations are quick and easy, but the more you want to save, the more effort it is to do so.
This holds especially true when you realize that effort = money going towards your CPA’s new Lambo — unless you want to do all the work yourself. Every bit of research required will reduce your actual savings significantly — because at some point you spend a dollar fifty or more on CPA fees for each dollar saved on taxes.
At some point, you actually lose money by optimizing your tax return.
So in the end, you have to optimize the function depending on the investment sum, your CPA fees and the size of your possible savings/investments. However, those things are not the only factors at play. The more support you offer to your CPA, the more you can save in fees.
As every CPA will tell you: Preparation is everything. The better prepared your statements are, the easier of a job the CPA will have with your accounts.
An export of your five exchanges and a few public addresses of your wallets might include all of the information needed, but will take hours upon hours of excavation work to extract the relevant information — not even thinking about optimizing for taxes.
It’s expensive and annoying for anyone
who isn’t a cool cat.
What your CPA will actually need to turn in is a simple tax report that includes all taxable gains/losses that you have made over the year.
To figure out what’s in the report is more art than science, but there are a few methods (holding periods, inventory methods, multiple depots) you can apply to minimize your taxable income.
In the case of crypto trades though, the “you” in “you can apply” is more of a general “someone with a loooot of time and patience on their hands” or “software”, than “you”, the reader.
If you want to go to the software-route of this digital age, you have a few different options to choose from. There are quite a few companies offering tax report solutions for crypto investors who all focus on different aspects.
As existing solutions weren’t able to fulfill the needs of Dennis and Alex, two early crypto investors who had spent quite a bit of time and money on their tax reports, they decided to take matters into their own hands and created a software solution for themselves that they later converted into a company called Accointing.
Accointing have made the process of creating tax reports as easy as possible. With the import function, you can simply connect all of your exchanges and wallets to the Accointing platform and pull an already-optimized tax report that you can just hand over to your smiling CPA. Easy as pie.
You generate tax savings in multiple ways:
- With an optimized automated report, you save a lot of your own time trying to figure out how to provide data to your accountant.
- You reduce the load of your CPA to figure out how to compute for your crypto taxes (or at least until he has automated away his job).
- With this, your utility function immediately changes because all of the preparation that is usually necessary is simply automated away.
What does this mean money-wise?
In the end, reaching the point of significant tax savings requires much less effort — the green graph becomes steeper — and therefore, you will have higher tax savings while at the same time paying less money to your CPA.
Since you reach high tax savings more easily, you need to spend less on CPA fees and save money overall.
Overall, helping your CPA is great for a lot of reasons:
- Your CPA doesn’t lose time and nerves due to the amount of work necessary to figure out your gains.
- You save a lot of money on CPA fees
- You get an optimized tax report that takes into account all of the different methods to save taxes.
If you want to save money and hassle, feel free to check out accointing.com and find out how easy it is to create a tax report for your crypto portfolio.
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