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W.T.F (We're Trying to Figure-out) with Saul | MY-CPEđź“šFiguring Out: Accounting & Tax Challenges in Crypto | Podcast #EP1
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Tune In and Earn Your Free CPE Credit with Our Latest Podcast Episode 🌟Join us for an in-depth dive into the world of crypto accounting and taxation on the latest episode of "WTF with Sau...2024-09-0246 min
Accounting For Crypto AssetsNon-Taxable Transactions: Soft ForksSoft forks are protocol changes to a blockchain (ETH to ETH 2.0 when The Merge occurs, for example) that remain compatible with previous versions and therefore do not create a taxable event. No new cryptocurrency is created in a soft fork. For now, just remember soft forks are not taxable, and we dive into the topic in much greater detail in the hard forks section of this book. Hard forks may or may not be taxable depending upon whether there is an accession to wealth. Receiving new cryptocurrency is an accession to wealth and is taxable; however, a hard fork...2023-12-2002 minAccounting For Crypto AssetsNon-Taxable Transactions: Inheriting CryptoWhen you inherit crypto assets, as defined by the IRS, you inherit property. The cost basis of the property is the FMV (average of the high and low for the day) at the time of death or six months later if the value of the assets has dropped and the alternate valuation date is elected. This election is only made when estate tax is due in order to lower the estate tax, which results in a lower cost basis and potentially higher capital gains tax upon disposition.At the federal level, if estate tax applies (the 2022 estate...2023-12-1801 minAccounting For Crypto AssetsNon-Taxable Transactions: Receiving Crypto as a GiftThe IRS’s FAQ sums up the rules for receiving crypto as a gift:“If you receive virtual currency as a bona fide gift, you will not recognize income until you sell, exchange, or otherwise dispose of that virtual currency. See Publication 559. Your basis in virtual currency received as a bona fide gift differs depending on whether you will have a gain or a loss when you sell or dispose of it. For purposes of determining whether you have a gain, your basis is equal to the donor’s basis, plus any gift tax the donor paid on the gi...2023-12-1302 minAccounting For Crypto AssetsNon-Taxable Transactions: Gifting and DonatingGifting crypto assets to individuals generally will not have any tax implications unless you are super-rich; the inflation-adjusted lifetime exemption for federal gift tax (aka “death tax”) is $12.06 million per individual and $24.12 million per married couple in 2022. If you are receiving this much crypto as a gift, you should speak with an estate planning attorney. For the rest of us, gifts of more than the 2022 annual exclusion amount of $16,000 per individual and $32,000 per married couple create a reporting requirement with no financial impact. IRS Form 709 is used to disclose excess beyond the annual exclusion to the IRS, which is appl...2023-12-1105 minAccounting For Crypto AssetsNon-Taxable Transactions: Borrowing CryptoBorrowing crypto assets is no different than borrowing from a traditional lender. The IRS does not consider a loan to be taxable income because it must be repaid. On the other hand, if a crypto loan with an initial USD value of over $600 is forgiven, you should receive a 1099-C for cancellation of debt (COD) income, which is taxable. If the loan provider requires an exchange of crypto for you to get the loan — for example, swapping ETH for cETH to get a loan in Compound (referring to https://compound.finance/) — a conservative approach would be to report the gain...2023-12-0601 minAccounting For Crypto AssetsNon-Taxable Transactions: Crypto TransfersTransfers among commonly owned accounts (wallets/ addresses/ exchanges) are non-taxable events. For example, you may move your MATIC from Crypto.com to Binance Earn to get a better yield for staking it. A transfer such as this could trigger a reporting requirement for an exchange or other platform that results in the issuance of an “information return.” An information return, such as a 1099-K for example, is sent to the IRS and to you, but it would not cause a taxable event if it arose solely as the result of a transfer. Note that in the example of moving MATI...2023-12-0402 minAccounting For Crypto AssetsNon-Taxable Transactions: Buying Crypto with FiatWhen you buy cryptocurrencies with fiat dollars, you do not have a taxable transaction. The same can be said for buying an NFT with fiat money. Using other crypto or stablecoins to buy crypto will likely have tax consequences, as we discuss in this and future videos.2023-11-2902 minAccounting For Crypto AssetsNon-Taxable Transactions: IntroductionMany actions you’ll take with crypto are not taxable. Here’s a non-exhaustive list, and we’ll cover each in more detail in this course:– Buying crypto or NFTs with fiat currency– Transfers– Borrowing crypto– Gifting and donating crypto assets– Receiving crypto as a gift– Inheriting crypto– Soft forksIt is not always apparent whether a transaction involving crypto assets causes a taxable event or not. The IRS has shed some light on what does not facilitate a taxable transaction with respect to virtual currency. We can take this a step further and g...2023-11-2904 min
From Niche to Necessity: Tax & Accounting for Web3 and Digital AssetsS1E9 - Sukesh Tedla | Kryptoskatt🎙️ New Podcast Episode Alert! 🎙️Join us in the latest episode of "From Niche to Necessity: Tax & Accounting for Web3 and Digital Assets," presented by CryptoCFOs. This time, Taylor Zork, CPA/MBA has a fascinating conversation with Sukesh Tedla, the CEO, and Founder of Kryptoskatt.In this informative discussion, Tedla unravels the intricacies of DeFi, NFT market, and crypto taxation, sharing crucial advice to help you understand and manage digital assets better.Key takeaways from the episode:🔹 Navigating the Challenges in DeFi and NFT Market: Understand the complexities of a crowded market, and learn how to...2023-06-0519 min
From Niche to Necessity: Tax & Accounting for Web3 and Digital AssetsS1E8 - Antoine Scalia | Cryptio🎙️ New Podcast Episode Alert! 🎙️We're excited to share the latest episode of "From Niche to Necessity: Tax & Accounting for Web3 and Digital Assets," presented by CryptoCFOs where we dive into the complex world of crypto accounting.In this episode, Taylor Zork, CPA/MBA is joined by Antoine Scalia, founder, and CEO of Cryptio, who shares valuable insights on navigating the challenges of accounting in the digital assets industry.Key takeaways from the episode:🔹 Education is Key: Gain hands-on experience and deepen your understanding...2023-05-0128 minAccounting For Crypto AssetsFundamentals: Triple Entry AccountingUnderstanding Triple Entry Accounting2023-01-1202 minAccounting For Crypto AssetsFundamentals: Continuous Audits & Process Control NFTsUnderstanding Continuous Audits & Process Control NFTs2023-01-1204 minAccounting For Crypto AssetsFundamentals: Capital Gains & Ordinary IncomeMost income is taxed in three different ways, and taxpayers can make decisions that affect that classification. Understanding the tax classification of earned and asset-based income is essential to minimize taxes. Income is classified as:Long-term capital gains (capital assets held more than a year)Short-term capital gains (capital assets held one year or less)Ordinary income (income earned by wages, salaries, tips, commissions, interest, income earned from a business or through self-employment, and non-qualified dividends)Long-term capital gains (LTCGs) usually have the most favorable tax rates; tax brackets in 2022 for...2023-01-1203 minAccounting For Crypto AssetsFundamentals: Cost Basis and Holding PeriodCost basis and holding period are the two inputs that determine the tax impact of a capital asset transaction, including crypto assets.Cost basis is an important concept as it determines your gain or loss when you arrive at a taxable crypto transaction. The automated tax software currently available for crypto accountants and investors is lacking in its ability to track basis across platforms. The software cannot know whether it has complete information or not, and sometimes comes to erroneous conclusions about basis in the face of DeFi transactions or users who interact with multiple exchanges or...2023-01-1211 minAccounting For Crypto AssetsFundamentals: Utility vs. Governance TokensWhat gives a cryptocurrency value?Market capitalization is the price of a crypto asset multiplied by the circulating supply; the calculation offers a sense of the overall growth potential of a project. As an example, for the popular meme coin Shiba Inu (SHIB) to grow from a price of 0.00002447 to $1.00, it would require a 40,866x (4,086,600%) increase in price. This move would take the market cap from approximately 13,500,000,000 to 551,691,000,000,000 USD (yes, $551 trillion, which is more than the total value of all of the world’s real estate). Excluding discussions of burn mechanisms and prior performance (SHIB is still up...2023-01-1207 minAccounting For Crypto AssetsFundamentals: Coins vs. TokensCoins and tokens form two major types of cryptocurrencies.Coins are cryptocurrencies with their own native blockchain networks (Ether/ETH, Bitcoin/BTC, and Litecoin/LTC). These coins are the result of years of coding and building a robust and secure blockchain network that requires decentralized computing power to secure. As a result, coins are more difficult to create because they require entire networks to support their use and value proposition. Coins are rewarded to those who supply computing power for processing transactions and are generally used as the fuel for the transactions that are processed on that...2022-12-2205 minAccounting For Crypto AssetsFundamentals: Enterprise Custody SolutionsWhile seemingly counterintuitive to the ethos of blockchain and cryptocurrencies, enterprise custody solutions can serve a purpose for high-net-worth (HNW) individuals who prefer a third party to hold and maintain custody of their crypto assets.Companies like Ledger, Kraken, and Coinbase offer custody services for HNW and Ultra-HNW individuals, estates, and companies. These solutions are generally cost-prohibitive for the average investor.For many public figures within the crypto space, their mere participation in the industry can put a target on their back, as a would-be thief may assume that the individual has access to the...2022-12-2203 minAccounting For Crypto AssetsFundamentals: Multisig WalletsMultisig wallets require multiple signatures (multiple wallets approving the transaction) to sign or confirm transactions and can be secured with either a hot or cold storage wallet. This method provides for much greater security as there is no one single point of failure. A multisig wallet secured via cold storage is the gold standard for security with crypto assets, but this protection comes at the expense of convenience. This type of storage should be employed for large asset balances that are kept for longer time frames.2022-12-2205 minAccounting For Crypto AssetsFundamentals: Cold Storage WalletsA cold storage wallet is used for storing crypto assets where the private keys and access to the wallet are offline thereby protecting the funds from unauthorized access, hacks, and other vulnerabilities. There are physical devices, like Ledger’s Nano S or Trezor’s One, or simply something analog like a sheet or paper containing the private keys to the wallet. With the physical devices, the unit is connected to a computer to authorize transactions and generally has a passcode to gain access to the device itself. The security advantage of storing funds on a cold wallet is th...2022-12-2206 minAccounting For Crypto AssetsFundamentals: Exchange & Hot WalletsExchange wallets are funds held on centralized exchanges (CEXs). If a taxpayer purchases crypto assets on a CEX like Coinbase or Kraken, then the assets are in the exchange’s wallet. When investors leave funds on exchanges, they are relying on a third party to secure their assets. Exchanges have been hacked and bad actors inside an exchange have stolen and mismanaged funds; in the strange case of the Quadriga Ex exchange founder who suddenly died under suspicious circumstances, the private keys to $190 million of users’ funds vanished.Relying on exchanges to secure funds is only for acti...2022-12-2205 minAccounting For Crypto AssetsFundamentals: Consensus Mechanisms2022-12-2203 minAccounting For Crypto AssetsFundamentals: Securing Crypto AssetsNow that we have a better grasp of how wallets function for crypto assets, we need to understand the inextricable link between decentralization, self-custody, and security. In the world of blockchain and cryptocurrency, no bank holds and secures your funds. You are the bank. As a result, you rely on varied levels of security based on the context of the usage of funds.A real-world example of this concept is the difference between a wallet you carry in your pocket and a bank vault. Obviously, the money kept in a wallet is less secure than money stored...2022-12-2203 minAccounting For Crypto AssetsFundamentals: WalletsIn the world of cryptocurrencies, wallets act as “bank accounts.” Cryptocurrency wallets consist of a private key and a public key. The private key secures access to your wallet, while the public key is the address that allows people and companies to send funds to your wallet.One of the major trade-offs with cryptocurrency wallets vs. traditional bank accounts is that since you are responsible for custody and security of your funds, no one can help you recover funds if you lose your account information. The private key secures access to your wallet; if this or the reco...2022-12-2204 minAccounting For Crypto AssetsFundamentals: Currency or Property?UPDATE: the CFTC announced on December 13, 2022 that some assets, including BTC, ETH, and USDT are commodities under US Law. The IRS has generally classified cryptocurrency as property and applies tax regulations in a similar fashion to stocks or real estate. For this reason, we will not discuss the tax treatment of fiat currency transactions here. Crypto assets can be held as capital assets or received as W-2 wages, self-employment income, or royalty income. Additionally, they may also be treated as inventory by traders and brokers in certain instances.As you can see, this asset class is extremely v...2022-12-2204 minAccounting For Crypto AssetsFundamentals: Introduction to Accounting for Crypto AssetsWelcome to Fundamentals of Accounting for Crypto Assets. This course is presented by Taylor Zork, CPA, MBA of CryptoCFOs.com To learn more and to become a member of our growing community visit www.CryptoCFOs.com2022-12-2206 min