CryptoTrader.Tax for Tax Pros: Calculating Cryptocurrency Capital Gains and Losses For Clients
Calculating cryptocurrency gains and losses to report on Form 8949 can be an excruciating task for accountants. Because cryptocurrency is transferable by nature and can be sent from one platform to another, it is difficult to keep track of cost basis and capital gains/losses data. CryptoTrader.Tax is a platform built to automate the entire crypto tax reporting process and make your life as an accountant a whole lot less painful.
Cryptocurrencies like bitcoin are treated as property in the eyes of the law, not as currency. Just like other forms of property — stocks, bonds, real-estate — you incur capital gains and capital losses that need to be reported on your tax return whenever you sell, trade or otherwise dispose of your cryptocurrency.
Our Complete Guide to Cryptocurrency Taxes discusses these basics in more depth.
Why Crypto Tax Reporting Becomes So Difficult
Because cryptocurrency users are constantly transferring crypto into and out of various platforms and cryptocurrency exchanges, the platforms themselves have no way of knowing how, when, where or at what cost (cost basis) their users originally acquired their cryptocurrencies. It only sees that they appeared in a wallet on their platform. This means the exchanges also can’t provide reporting on this data.
The second you transfer crypto into or out of an exchange, that exchange loses the ability to give you an accurate report detailing the cost basis and fair market value of your cryptocurrencies, both of which are mandatory components for tax reporting. In other words, cryptocurrency exchanges do not have the ability to provide you with the necessary information to calculate your capital gains and losses. This also means that they don’t have the ability to provide you with a 1099-B.
The 1099-B is the typical form that clients send their tax accountants at the end of the year detailing their investment holdings and activity. These are the forms accountants use to calculate total capital gains and losses and are common on platforms like Betterment, Etrade, and other brokerage accounts. Cryptocurrency exchanges will send some clients a 1099-K, which is not helpful for gain/loss reporting. Again, because exchanges can’t provide the necessary data, accountants need to build the 8949’s from scratch. That is where CryptoTrader.Tax comes in handy.
How Accountants Can Use CryptoTrader.Tax
You can use CryptoTrader.Tax in tandem with your client(s) to automate the 8949 and entire crypto tax report creation. Learn how in the options below.
1. Get Invited By Your Client
If your client already has an account with us, they have the option to invite you to view and access their account. This allows you to view and download your clients completed cryptocurrency tax forms directly from your tax professional dashboard. In this circumstance, very little work is required on your end. Your client has already imported all of their cryptocurrency transaction history and paid for their completed tax report. You can access their tax reports, download them, and import them into your preferred tax filing software such as ProConnect, Drake, ATX, UltraTax, and more.
The benefits of going with this route include:
- Don’t have to worry about invoicing your client for the CryptoTrader.Tax tax plan - they have already paid.
- If there are any issues with your client's CryptoTrader.Tax account, they typically resolve it with the CryptoTrader.Tax support team
- No work is needed on your end. All you have to do is download the reports and file them!
2. Create a Tax Professional Account
If your client has come to you asking for help with their crypto taxes, you can invite them to use CryptoTrader.Tax from your CryptoTrader.Tax Tax Professional Account. By creating a Tax Professional Account within CryptoTrader.Tax, you will have a single location to manage all of your cryptocurrency clients in one place. You can invite as many clients as you need under your tax professional account. Your client dashboard gives you a convenient way to access each account, help reconcile missing transactions, and keep all client data protected in a single location (pictured below). Creating a CryptoTrader.Tax Tax Pro account is completely free. You can learn more about it and sign up right here.
The benefits of inviting your client include:
- Time savings. No manual work is needed on your part.
- Your client gets to leverage CryptoTrader.Tax customer support.
- No need to invoice your client for the cost of CryptoTrader.Tax - they will pay for the report.
3. Do The Work On Behalf of Your Client
If your client isn’t as tech savvy or doesn’t want to touch any of this, you can also create their necessary tax reports for them using CryptoTrader.Tax. Simply signup for a normal CryptoTrader.Tax account in this case and go through the report creation process.
- More control over your client’s tax engagement
- Priority customer support
- Ability to charge a premium to your client for providing a full, end-to-end service
- Need to get your client’s transaction history from their exchanges (learn how here).
- More back and forth required with your client
Getting your clients cryptocurrency tax reporting done does not have to be a painful process. The easiest way to manage your cryptocurrency clients and auto-generate necessary crypto tax reports is to create a Tax Professional account with CryptoTrader.Tax. You can create your account for free today! Get started here.