Super Financial Limited | Accounting services for cryptocurrency trading (2024)

FAQs

What is the accounting treatment for cryptocurrency transactions? ›

Many of the most common digital assets (e.g. bitcoin, ether, solana, cardano) are accounted for as intangible assets under US GAAP (crypto intangible assets).

Because of their financial expertise, accountants are ideally suited to work in crypto accounting and manage digital assets. They can understand and accurately interpret blockchain transactions to later account for them in their general ledger.

Investors can ask a financial advisor if they think cryptocurrencies are a good financial asset, how to invest in crypto, and if the advisor holds any crypto investments.

Treatment in financial statements

Cryptocurrencies as intangible assets are initially recorded at cost (i.e., the price they were bought for). Later on, their value is adjusted by subtracting amortization over time (if any) and losses due to value drops. Any increase in value after a drop is considered income.

Alongside capital gains, many crypto users need help accounting for crypto mining and staking. They often also need help understanding the difference between taxable events affecting their tax liability and non-taxable events that must be recorded to make accurate crypto tax calculations.

For example, an investor who held a digital asset as a capital asset and sold, exchanged or transferred it during 2023 must use Form 8949, Sales and other Dispositions of Capital Assets, to figure their capital gain or loss on the transaction and then report it on Schedule D (Form 1040), Capital Gains and Losses.

According to the good people over at Reddit, a crypto tax accountant may charge in the region of a cool $300-$500 per hour. Yes, per hour.

What if I get audited? The IRS has started auditing taxpayers specifically to evaluate their crypto trades. This is nothing to worry about and you are expected to disclose any addresses or wallets you own or control and any exchange accounts you have.

Cryptocurrency transactions are traceable, requiring exchanges to report to the IRS, necessitating diligent reporting by users. The IRS uses advanced methods to monitor crypto transactions, ensuring tax compliance.

Vitalik Buterin - @VitalikButerin

Vitalik Buterin is a co-founder of Ethereum and one of the most respected thinkers in the crypto world.

What is the most financially secure crypto exchange? ›

If you are looking to trade on a highly secure, regulated crypto exchange that offers a large number of supported cryptocurrencies, Gemini is your go-to choice. If you are looking to trade a wide range of new and small-cap crypto tokens, BitMart is arguably the best choice.

You are required to pay taxes on all profits from crypto transactions, even if they are only $1. Crypto exchanges are required to report earnings of more than $600 to the IRS for each taxpayer using Form 1099. Even if you do not receive a Form 1099, you are still required to pay taxes on crypto earnings under $600.

Is a cryptocurrency a financial instrument? Cryptocurrencies are not financial instruments under U.S. GAAP because they do not represent cash or a contract establishing a right or obligation to deliver or receive cash or another financial instrument.

Cryptocurrency trading activities should be recorded similarly to those of stock trading activities. If one buys Bitcoin (BTC) or Ether (ETH), these digital assets can be added to the balance sheet at their fair market value on the date the assets were purchased. This will reflect as a debit on one's assets account.

The crypto asset meets the U.S. GAAP definition of an intangible asset. The holder does not have “enforceable rights to or claims on underlying goods, services, or other assets.” The asset is created or resides on “a distributed ledger based on blockchain or similar technology.” The asset is secured by cryptography.

They list it on their Balance Sheets as a “Digital Asset,” and since it's indefinite-lived, there is no amortization. Under U.S. GAAP, companies record Impairment Losses on indefinite-lived intangible assets when their value falls, but they cannot revalue them up outside of M&A deals.