Bitcoin and other cryptocurrencies are becoming an important part of the global digital economy. As their prevalence increases, many CPAs are realizing that they can leverage this cutting-edge financial instrument to provide more sophisticated service to their firms or enhance their practices to serve technologically advanced clients.
“Cryptocurrencies are an emerging asset class with some compelling long-term potential,” according to “4 tips for CPAs providing cryptocurrency tax services” on AccountingToday.com. “The opportunities for CPAs to tap into the growing set of investors in the sector are evident.”
CPAs can expect to see these changes relatively soon in their careers. A World Economic Forum report, “Deep Shift – Technology Tipping Points and Societal Impact,” predicts that 10% of global gross domestic product (GDP) will be stored on blockchain technology by 2027.
Earning a master’s of accountancy online can help accountants develop the skills to stay abreast of trends in the field, including the rising popularity of cryptocurrency. The degree also offers curriculum designed to prepare graduates to sit for the CPA exam. Graduates of the University of North Dakota’s Master of Accountancy program consistently beat the national average on all four parts of the CPA exam, which often leads to positions at top national and regional CPA firms.
Cryptocurrency is virtual or digital currency that is encrypted for security. Transactions are peer-to-peer with no centralized control or middleman, such as a bank. Most of the currencies – bitcoin is the oldest and most well-known – operate on what Investopedia called “decentralized systems based on blockchain technology, a distributed ledger enforced by a disparate network of computers.”
Cryptocurrencies are recognized as being safer than traditional payment methods, especially when so many financial transactions are taking place online. They also allow for easier international transactions that are not subject to fluctuating exchange rates, Investopedia noted. As many as 1,600 cryptocurrencies were being traded as of April 2019, according to Investopedia.
Because cryptocurrency is becoming part of general accounting terminology, some basic concepts can help interested CPAs understand more about these developments:
- Cryptocurrency: A virtual or digital currency that is encrypted for security. Bitcoin, created in 2009 as open-source software, is the oldest and most well-known and leads the field of cryptocurrencies in terms of market capitalization, user base and popularity, according to Investopedia. Others include:
- Litecoin: Launched two years after bitcoin, Litecoin is also an open-source global payment system that offers a faster transaction confirmation rate than its predecessor.
- Ethereum: A decentralized software platform that enables smart contracts, which Investopedia explains are “self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code.”
- Dash: Also known as darkcoin, Dash is a more secretive version of bitcoin. Transactions are virtually untraceable.
- Ripple: A global network that lets banks settle international payments in real time.
- Blockchain: The record-keeping technology that supports bitcoin. In short, Investopedia noted, blockchain is pieces of digital information that are strung together to record information about transactions.
- Tokens: A type of virtual currency that represents its own asset or utility and lives on its own blockchain. They can be traded or transferred between participants in the blockchain.
- Wallet: A system that tracks the ownership of digital currencies.
- Mining: A method of earning cryptocurrency without having to put money down on it. The process involves special software to solve math problems, according to BitcoinMining.com.
Cryptocurrency and Accounting Services
The IRS considers bitcoin and similar currencies property, not currency, which can raise issues for clients at tax time or when those currencies are included in investments such as IRAs.
Accounting Today notes that filing taxes for cryptocurrency clients can be a complex undertaking.
“The sheer scale of cryptocurrency exchanges, both foreign and domestic, as well as different avenues for investing and using them (i.e., mining or trading), makes them a novel asset class with few tools at your disposal to ease the burden of filing,” according to the website.
Developing a proficiency in accounting for cryptocurrency trading can become a profitable option for CPAs. Accounting Today offers four tips for those who want to expand into this specialized segment of the market:
- Learn the basics of the technology: CPAs don’t have to understand everything about cryptocurrency. Start with bitcoin and branch out to more complex concepts, including how to determine what differentiates bitcoin income from bitcoin investments.
- Adapt bookkeeping practices to remain narrow: Crypto transactions are taxable events that result in capital gains or losses. Payments, however, are treated as regular income. Regulations can vary widely, however, so consult both the IRS and state agencies for guidance.
- Use cryptocurrency tax software: Specialized software can filter the crypto transactions and export them to standard accounting software.
- Market services to crypto investors: Many cryptocurrency investors are novices who are actively seeking accounting and tax services because they are unsure how to file their own taxes.
University of North Dakota’s Master of Accountancy Online Degree
The University of North Dakota’s Master of Accountancy (M.Acc.) online program helps prepares graduates to stay on the cutting edge of changes in the accounting field, including cryptocurrency.
The program is accredited by the Association to Advance Collegiate Schools of Business International, which only recognizes about 30 percent of business programs in the United States. The Master of Accountancy online program offers practitioner and fundamentals tracks. Coursework is done online, which lets busy professionals earn their degree without disrupting their work or personal lives. For more information, contact UND today.
4 tips for CPAs providing cryptocurrency tax services: AccountingToday.com
Deep Shift: World Economic Forum
The 10 Most Important Cryptocurrencies Other Than Bitcoin: Investopedia
Bitcoin mining: Bitcoinmining.com
4 tips for CPAs providing cryptocurrency tax services: Accounting Today