5 steps for a relaxed accounting of the Cryptos
Apr 10, 2018 Posted / 1436 Views
The tax season is coming in the United States. The increase in the number of cryptocurrencies in the market has posted both advantages as well as disadvantages for the people of the United States.
As the Crypto market became a $400 billion industry, due to the spikes in its value has drawn the attention of the various financial regulators.
With the market price of cryptocurrencies fluctuating very rapidly. Along with which the surge in volume of transactions being done using cryptocurrencies has posed a challenge for the accountants as to find out the most efficient way to manage other cryptocurrencies accounts. Currently managing cryptocurrency transactions is very difficult. Below are a few tips which can be applied for the simplified and efficient way of accounting cryptocurrency transactions.
According to the Tax Cuts and Jobs Act of 2017, it doesn't include crypto-to-crypto trades from being treated as 1031. This concept had been used for a very long time by the traders to evade taxes. Changes in the laws had occurred earlier itself but are effective from this year.
Below are some essential tips which will be helpful for an effective bookkeeping.
The transactions in the cryptocurrency system are purely based on the addresses.Each user has a separate public key and private key. In the cryptocurrency world, we can create any number of wallet addresses and have transactions through them. But the problem arises if we do not keep the record of these addresses thoroughly. And especially if you are a business person then not having documentation of your addresses will be a great headache for your accountant. In fact, it is recommended that a person must have an address completely devoted to business transactions and another one for the private transactions as no one wants to mix up their personal transactions with the professional one. Also employing financial advocates is highly advisable at earlier stages itself.
The fiat currency values keep fluctuating with respect to the cryptocurrency values at even a short regular of intervals. That is the reason why in any transactions there is never one to one correspondence between the cryptocurrency and the Fiat currency values. Regardless of which the account needs to be maintained. Each ledger must contain a list of crucial pieces of information about particular transactions namely.
If the above-mentioned points are followed clearly by you then you, must be able to track your income and expenditure of the cryptocurrencies very seamlessly. At an overall view, we must be deciding our accounting theory as FIFO or LIFO as soon as possible. Once decided we must adhere to the methodology for all our transactions.
Precisely if you are in The United States, then FIFO is the preferred widely. The great results in any work are achieved only with consistency and continuity, so it is to be understood that these conditions must be followed on a regular basis. Also consulting advisors on a regular basis will be of great help.
In future, there might arise a situation wherein we must be providing shreds of evidence for our transactions in the form of receipts. Exactly similar to bank statements.
Along with including the key details of a transaction in your ledger it is also highly preferred that we take screenshots of the transactions itself. We must also safely store all the invoices that are provided by the traders, vendors and many other people.
Undertaking high volumes of transactions with companies are people who are not scrutinizing rules and measures in a proper way, may lead to frauds both in reference to fiat currencies and also cryptocurrencies.
We must categorize our transactions based on the type of transaction into different ledgers and not store all the transactions in one ledger only. Because not many of the Accountants have the patience to decode all your transactions which were stored in a single ledger. Categorising the transactions will be helpful to them.
Applancer is an open platform for discussion on all things like Blockchain , Cryptocurrency and Ico news updates. As such, the opinions expressed in this article are the author's own and do not necessarily reflect the view of Applancer .
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